There Is No Housing Bottom in Sight

[marmar]

from Minyanville:




There Is No Housing Bottom in Sight
By Keith Jurow Sep 01, 2011 7:45 am


At the end of June 2011, macromarkets.com released the results of a poll in which 108 leading economists and housing market analysts were asked to predict the direction of home prices from now until 2015.

All except four of them predicted that housing markets around the country would hit bottom no later than the end of 2012 before climbing again. Only one of them thought that home prices would not bottom until the end of 2013.

By way of contrast, a survey of consumers released in May by trulia.com and realtytrac.com found that 54% thought that a housing market recovery would not occur until “2014 or later.”

My premise is simple: There is no housing bottom in sight. To test this assertion, let’s take a brief look at three major metro markets and see what I’ve found. .............(more)

The complete piece is at: http://www.minyanville.com/businessmarkets/articles/housing-market-home-prices-home-prices/9/1/2011/id/36233

[dkf]

1. As long as there is a stream of foreclosures there is no bottom.

And as long as there is no bottom, people are going to lose more money in their homes and will feel poorer and poorer.

Better to bottom sooner, start rising and at least homeowners feel like they are improving instead of drip drip drip declIning. But that won't happen.

[xiamiam]

2. there is a reason that bankruptcy protecting personal res was in place from the depression -2005

leading economists have recommended consistently to reinstate it..no mention of it since the stimulus and the campaign trail..ya know, helping homeowners and all that happy talk..its obscene that we are not even talking about it..there is no bottom in site..everyone and i mean everyone loses..the banks have screwed us royally yet their punitive measures toward homeowners are accepted behavior..the banks would rather move out the homeowner who has lived there for decades and sell to someone new at half the price rather than offer that same or similar deal to the existent homeowner..why punitive?..confidence and hope have been eroded..trust me on that

[happyslug]

6. Bad History, Bankruptcy did NOT protect homes till the late 1970s

When the Bankruptcy Code was adopted in the late 1970s to replace the previous Bankruptcy Act of 1898 what is now called Chapter 13 bankruptcy was added. Prior to that change, the only way your home was protected if the State provided such protection in any NON-bankruptcy provision (For example Florida forbids any execution on your primary residence UNLESS it is for a Mortgage on the residence, many other states had similar provisions, thus under Florida Law you could declare Bankruptcy and as long as you paid your mortgage you kept your house. My home state of Pennsylvania was the direct opposite, even if you kept your mortgage payments up, the other creditors could sell the house).

Under the pre 2005 Chapter 13 provisions of the Bankruptcy Code, it was possible to come up with a Chapter 13 plan to pay off all of your creditors which including forcing down any mortgage on your home to the home's actual value (The remaining amount of the mortgage was converted to unsecured debt), then you converted the Chapter 13 to a Chapter 7 and discharged all the unsecured debts (Including the debt separated from the Mortgage under the Chapter 13).

In the 2005 reform act, the above was no longer possible, the Reform act included a provision that ANY lien (Such as a mortgage) that was a product of contract (As opposed to operation of law, for example if someone wins a judgement against you, that is a lien on your property but since it is NOT a product of Contract can be discharged in a Chapter 7) stayed a lien even if the lien exceeded the value of item secured by the lien. The only way to discharge such a mortgage/lien was to sell the property (and this has become a big issue, many buyers are just turning their homes over to the Mortgage holder and then filing chapter 7, leaving the banks holding the bag given the recent drop in real estate prices).

One last comment, Chapter 13 was added in the late 1970s when the present Bankruptcy Code was adopted to replace the old 1898 Bankruptcy Act. This was do to a court decision that individuals could file a Chapter XI Bankruptcy under the old 1898 Bankruptcy Act. Chapter XI of the Old 1898 Bankruptcy Act covered businesses that wanted to stay in business, but had excessive debts (And had a viable business). Chapter XI was thus for business reorganization. For decades before the 1970s most (If not all) Bankruptcy Courts had ruled that meanly having a steady source of Income (i.e. Wages) was NOT enough to permit you to reorganize your debts under a Chapter XI. Then a Court of Appeals ruled that yes such a person could file under Chapter XI of the 1898 Bankruptcy Act for that act clearly included "person" in its definition of who could file a Chapter XI. This was a well liked ruling by people with Mortgages and thus attempts to reverse that decision was opposed in Congress when the present Bankruptcy Code was adopted in the late 1970s, thus Chapter 13 was born. The best part Chapter 13 went beyond what could be done under the old 1898 Bankruptcy Chapter XI when it came to mortgages and other debts, but is restricted to people with mostly personal non business debts.

Side Note, the 1898 Bankruptcy Act uses Roman Numbers for its sections, the Bankruptcy code uses Arabic Number. Thus Chapter XI refers to the 1898 Bankruptcy act, and Chapter 11, refers to the same section of the late 1970 Bankruptcy Code (And present law) and thus why I used Chapter XI in the previous paragraph for I was referring to the old act NOT the present Code.

[xiamiam]

9. thanks..so the difference is that before 2005 they would adjust the mortgage to the current value?

[Shagbark Hickory]

3. Lets do away with private for-profit mortgages.

The fed should make those illegal.
Then people could pay off their homes in say 10 years instead of 30.

[Odin2005]

11. IMO all banks should be non-profit.

[Shagbark Hickory]

12. Why would anyone bother to loan money if there was nothing to be gained from it?

Banks are basically investors and I don't have a problem with that.

What I do have a problem with is the housing system in this country where most people spend their whole lives essentially renting a house.
I also believe the sale of housing should be non-profit but in absence of that, small mortgages- for say $100k or maybe even $200k could be non-profit and offered by something like a freddy or fannie. The terms would be much shorter, maybe 15 years max. 100% of the payment goes towards the principle. This is how you help people live the dream of homeownership.

[xxqqqzme]

4. Confirms what I suspected.

"...it has become increasingly clear that this huge and growing number of seriously delinquent homeowners may be the key to understanding where nearly every major housing market will be heading. It is not a pretty picture to contemplate. But ignoring it is no way to prepare for what is coming."

The real estate agents I know try to paint a rosy recovery picture but the SoCal market was wildly over priced & over burdened. There was only one way it could go. Now with no jobs, people are barely hanging on.

[Broderick]

5. The for sale signs on foreclosed homes

dot the landscape more than the trees do here.

[CrispyQ]

8. I know a few people who are current on their mortgage but underwater on it.

My sister & BIL bought their house in 2000. It quickly went up in value, they borrowed against their new equity, & now their house is valued for what they bought it for in 2000. Needless to say, they still have a significant balance on the line of credit. ~sigh. They are making their payments ok, but it will be years before they see equity in their house again.

[xchrom]

7. recommend

[Odin2005]

10. The bottom needs to drop out of the housing market for housing to become affordable again.

The housing market has been inflated for a long time.

[ozone_man]

15. A correction was needed.

Housing needs to come down by 50% from the peak, so we are still in the long ramp down in prices. The biggest bubble in history is not ended in a year or two.

[Name removed]

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