The number of foreclosure filings in August are up 115% from one year ago, and jumped more than 36% from just last month:
http://www.foxnews.com/story/0,2933,297157,00.htmlI don't understand why we're talking about O.J. Simpson, and Brittany Spears' kids, and Warren Jeffs instead of the fact that currently 1 in every 500 Americans are already in the process of losing their home with the worst yet to come. This is a huge problem people, and it is setting up the country for an economic catastrophe.
It seems that there is this attitude that all of these foreclosures are other peoples' problems and that its not going to affect the broader enconomy as a whole - which of course couldn't be further from the truth.
What people are really failing to consider is that the fact that these foreclosures have already had such a negative impact on the economy that the feds are being forced today to cut rates in order to ward off another potential recession - and we are just in the very BEGINNING stages of the full crisis.
We are at the very first beginning of the formula that has caused the foreclosures we have seen so far. All of these foreclosures are almost exclusively "subprime" and "Alt-A" Adjustable Rate Mortgages (ARM) that had low fixed intro "teaser" rates for the first 2, 3, or 5 years of the loan after which the rate (and subsequently payment) skyrocketed. The foreclosures we are seeing right now were among the very first subprime and Alt-A ARMs that were originated at the beginning of the refinance boom which began in 2003 and peaked in 2005.
We seeing a few hundred thousand foreclosures wrecking havoc on the economy right now (mostly ARMs originated in 2003). But the fact is
millions of these loans were originated in between 2004 and 2006 that are set to adjust in 2008-2010. With the housing market not forecasted to rebound until at least 2009, almost every one of these people are certain not to be able to refinance or sell their home to escape this foreclosure trap.
The net economic effect of very large sustained home loss among middle class Americans over an extended period of several years potentially totaling in the millions is truly incomprehenisble. Aside from the obvious, this will without question dramatically affect you personally. Don't believe me?
Have you had your home appraised recently? If not, you're certainly in for a shock. Unless you live in a tiny select handful of counties in the United States, the best way to determine your current property value is to take what you "think" your home is worth, (or what it last appraised for) and immediately reduce that number by at least 10% if you live in the midwest, at least 15% if you live in the Northeast or the South, at least 25% if you live in Florida, and at least 30% if you live in California. Now that's just for certified appraisal purposes. If you would like to sell your home right now in any reasonable amount of time, you will need to reduce those numbers by even more. In other words, for the vast majority of people you can take whatever equity you "think" you have in your home and throw it out the window. If you purchased your home within the last 5 years, you can consider yourself very lucky is worth today what you paid for it. In most cases, its worth less. In some cases, its worth considerably less.
This is all due to foreclosures, pre-foreclosures, and fire sales. The value of real estate is determined by qualified buyers and what they are willing to spend. Right now there are relatively few qualified buyers in the marketplace. This is because of uncertainity and because it is much harder to get mortgage financing. Why would someone pay market value for your home when chances are they can find a similiar home in either a foreclosure or fire sale being sold for considerably less than market value? Why would a qualified buyer purchase your "used" home when chances are they can find a builder willing to offload a brand new model or spec home similiar to yours for next-to-nothing just to get from underneath the construction loan and property taxes the builder is paying on it? This is pretty much the case for every major metro area in the country right now and its driving down the prices of ALL of our homes and evaporating our perceived equity.
Tell you what, if you are really interested (and if its okay with the moderators) you can PM me your address and I will tell you what your home is worth right now. I have an extremely expensive software program we use to establish a home's value for the purposes of lending money on that home. The program pulls recent sales (last 3-6 months) of comparable homes (same room count, sq. footage, style, construction, age, & quality) in your subdivision and/or general area. This is the same exact program licensed appraisers use to perform certified valuations and appraisals.
If you're anything like every client we're talking to right now, you'll be sick to your stomach.
