I know I have beaten this subject to death, but people are still always asking me. Note, this problem he's talking about here doesn't include "strategic defaults" or the next wave of Alt-A, Option ARM's (Option ARMageddon), or the hundreds of thousands of defaulting prime loans. What he's talking about is just residue from the last wave, and this wave about to start right now is certainly bigger and will snowball as we head towards 50% of homeowners "underwater."
Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process, meaning their homes were well on their way to the inventory pile. That “shadow inventory” was up 30% from a year earlier. Based on the rate at which banks have been selling those foreclosed homes over the past few months, all that inventory, real and shadow, would take 103 months to unload. That’s nearly nine years. Of course, banks could pick up the pace of sales, but the added supply of distressed homes would weigh heavily on prices — and thus boost their losses." ("Number of the Week: 103 Months to Clear Housing Inventory" Mark Whitehouse, Wall Street Journal)
No matter how you look at it, housing will be in a funk for the next 5 to 10 years. There's just too much product and too few buyers. Austerity measures by the Obama team will only put more pressure on sales and prices.
Now that the government's homebuyer credits, subsidies and incentives have ended; demand for housing is drying up fast. The Mortgage Bankers Association (MBA) reports that new mortgage purchase applications have tumbled nearly 40 percent to their lowest level since April of 1997. Sales are in freefall. Prices have already slipped 30 percent from their peak in 2006. Another 10 percent could be the straw that breaks the camels back, as Whitney Tilson explains in a recent article titled "The Housing Non Recovery". Here's an excerpt:
"Today about 17.2% of homeowners are underwater. But if home prices drop 10% from here, 27% of homeowners would go underwater. In other words, a 10% drop in home prices would cause a 56% increase in the number of people underwater…which would almost certainly lead to another surge in defaults." ("The Housing Non Recovery", The Daily Reckoning)
Now that the government's homebuyer credits, subsidies and incentives have ended; demand for housing is drying up fast. The Mortgage Bankers Association (MBA) reports that new mortgage purchase applications have tumbled nearly 40 percent to their lowest level since April of 1997. Sales are in freefall. Prices have already slipped 30 percent from their peak in 2006. Another 10 percent could be the straw that breaks the camels back, as Whitney Tilson explains in a recent article titled "The Housing Non Recovery". Here's an excerpt:
"Today about 17.2% of homeowners are underwater. But if home prices drop 10% from here, 27% of homeowners would go underwater. In other words, a 10% drop in home prices would cause a 56% increase in the number of people underwater…which would almost certainly lead to another surge in defaults." ("The Housing Non Recovery", The Daily Reckoning)
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