It’s Friday, and it looks like mortgage defaults could go from bad to worse: [Thanks L!]
WASHINGTON — Call it son of subprime. Experts warn that a new wave of mortgage foreclosures may be coming soon and could rival the default rates for subprime mortgages and slow efforts to find bottom in a prolonged national housing slump.
The mortgages in question are $230 billion of option adjustable-rate mortgages, creative lending products that flourished at the height of the housing boom. In an option ARM, a borrower can opt to pay less than his or her monthly balance due, and the difference is tacked onto the outstanding loan balance.
Many experts had expected an explosion of defaults in the springtime on these roughly 564,000 outstanding mortgages. However, interest rates dropped to historic lows, and that delayed the detonation of what many housing analysts still see as a ticking time bomb.
"They’re probably going to default at a rate that makes subprime look like a walk in the park," warned Rick Sharga , senior vice president for RealtyTrac, a foreclosure research firm in Irvine, Calif.
Anything else out there exploding, imploding, fizzling or even improving? This is today’s open thread, so let us know what’s on your mind.
Hello, Doomers. While many locations seem to be exploding and imploding, here’s another glimpse at a place that seems to be way behind the curve: Billings, MT. Talk of being “recession-proof” runs rampant here, and perhaps with good reason: We still have <5% unemployment and no major housing bust.
But the housing market does seem to be budging a little. Some houses that sold 2-3 years ago are now going for 10-15% off. Not a major bust, but we’ll see what happens from here.
Housing starts are off 50-70% from peak, but they are still building and they are still asking crazy (in my opinion) prices.
Here’s a short video I did this past weekend, biking around to the 18 most active subdivisions to look at new construction going up. It’s not nearly as extensive as my previous videos, but you might enjoy it:
http://www.topoimagery.com/billings/2009/06/spring-construction-video.html
If you’re in CA or FL, it probably gives you a sense of nostalgia from 2-3 years ago!
Defaults will continue with the kinds of unemployment we are seeing. Home prices are still fizzling down in Wisconsin, I’m seeing more and more places priced below 100k. It’s getting to be a fairly decent time for first time buyers again, and prices that give equity builders some light at the end of the tunnel. Defaults are a good thing, it free’s up disposable income that would otherwise be going to fatcat bankers.
I see the option arm default wave coming too. Though, I am guilty of buying this month in San Antonio. The numbers worked out and family life has pushed me into buying after 5 years.