Take a look at that map (hat tip: Zillow) of mortgages in negative equity (underwater) and explain to me again how the home mortgage nightmare is a national problem.
It isn’t. It’s a local or regional problem with national implications. Fixing it requires solutions tailored to the specific conditions of the areas with the problems. Treating it as a national problem is like responding to a hurricane’s striking the Gulf Coast by rushing emergency services to all 50 states. It dilutes the response.
Triage, people.
Speeding up short sales has helped a lot here in the Phoenix metro. The foreclosure inventory has dropped drastically and prices are moving back up to normal quickly since the switch to easier short sales.
I suspect the map overstates the % of mortgages underwater now in Maricopa county because the gain has been quite fast. I was treading water a year ago, but a recent appraisal has me at 33% equity (some paydown, but the majority house price gain).
Sam, the zillow link does show that Phoenix is doing better than the national average on percentage of underwater homes held by delinquent homeowners. (Phoenix: 8%; USA: 9.2%) The map is based solely on “underwaterness” which I think is a false metric. The core economic problem is being underwater, plus some other factor, such as insufficient income to pay mortgage or lost job need to relocate. Solely being underwater is more akin to a poor savings rate, a point of vulnerability.
New York City has a much lower underwater rate, but it has the second highest percentage of those being delinquent (19.6%). Two approaches to taking off a band-aid.
I like the map because it’s a neat illustration of how localized the problems actually are. Basically, I think the resolution has been bungled, first by the Bush Administration and then by the Obama Administration (doubling down on the Bush Administration’s bad policies).
Ike once said “If you can’t solve a problem, enlarge it.” It’s one possible problem-solving strategy for generals and managers alike. But it’s not a cure-all.
In this particular case treating the problem as a national one makes it intractable. It’s not as though we don’t handle local problems with localized solutions all of the time. We do. Today we have too many arse-hats seeking master strokes. We don’t need a master stroke. We need chipping away, little by little.
In my area of Florida the market has hit bottom. I think those that were underwater and also lost their jobs have already lost their houses or are about to.
It was only a few years ago we managed to sell our house here at a considerable loss. Had it not been for a small inheritance from my Mother, we would not have had the cash to bring to closing without raiding our retirement accounts.
In our new upper-middle class neighborhood (where we are renting), most of our neighbors are underwater (and I’m pretty sure our landlord is too), but the ones that are left have stable employment. The ones that opted to strategically default have already done so. Family-sized rental properties (3 or more bedrooms) are at a premium now, so some of them are choosing to rent and are making money.
Housing is still a problem here, but I’m getting the sense that a corner’s been turned and the main issues are the broader economic problems.
@PD – In AZ the lender can’t come after the borrower for the difference and there were a lot of people who could afford the payments that just decided they would never make it back to what they owed. I think this makes underwater alone an important metric, at least here. We just jumped from 1998 to 2005 prices in the last year though which changes the momentum of the “walk away” decisions.
@Sam, it will be interesting in time to see some studies on the difference btw/ recourse and nonrecourse states on how they handled the housing crash. My guess is that it depends, and that the underlying economic conditions will predominate. The difference between the Detroit area and others might be solely in the economic horizons of its residents, regardless of the legal framework.
But my beef is that “underwater” is a mere opinion. If someone knocked at my door and told me that I’m underwater, I wouldn’t care one bit, though I would take that opinion to my property accessor, who would laugh and throw it back in my face. Market value is a function of time, place and conditions and all real estate is unique. You’ll know the price when you sell it.
I’d like my data more concrete. How many refis are turned away? How many mortgage payments are late? How many real estate property assessments are depreciated? How many foreclosures are held up by the risk of loss? If I understand what Zillow is doing — extrapolating existing sales to properties not for sale — I find that conjectural.
And I think New York’s attempt to stop foreclosures is a long-term problem that map doesn’t i.d.
Thus, give the power back to the States. The first time homebuyer’s credit only exacerbated my Georgia red-street woes. I’m still down around 45% according to Zillow, and still waiting on that Streamline Refi to go through (it should have closed two or three weeks ago). I’m thinking, ‘they can just keep that B.S. and leave me the hell alone’.
But my beef is that “underwater†is a mere opinion. If someone knocked at my door and told me that I’m underwater, I wouldn’t care one bit, though I would take that opinion to my property accessor, who would laugh and throw it back in my face. Market value is a function of time, place and conditions and all real estate is unique. You’ll know the price when you sell it.
Truer words were never spoken. If you are not in payment default, but only violate what is known as an “incurrence test” of loan to value only an idiot lender would take action. And I agree, PD, try to get property tax relief on this issue. Yeah right.