From the Wall Street Journal:
Housing, Bank Troubles Deepen
Foreclosures Reach
A New Record; Home Equity Falls
By SUDEEP REDDY and SARA MURRAY
March 7, 2008; Page A1
Two crucial barometers of the nation’s housing market have worsened markedly in recent months, ratcheting up pressure on policy makers in Washington for action to stem the growing housing crisis and its widening impact on the nation’s financial system.
Among the latest trouble signals, the number of American homes entering foreclosure rose to the highest level on record in the fourth quarter of 2007. Meanwhile, homeowners’ share of the equity in their homes fell to a post-World War II low.
The unwelcome contrast provides stark evidence of how falling home prices are weighing on consumers. And it could add urgency to efforts by Federal Reserve officials to avert a larger wave of foreclosures by prodding lenders to reducing the principal — or total amount owed — on troubled mortgages.
Perhaps most troublesome for policy makers: The deterioration in household finances is expected to continue throughout the year as housing prices fall further. “We are likely to be living with a high degree of uncertainty for some period of time about the ultimate magnitude and duration of the slowdown under way,” Federal Reserve Bank of New York President Timothy Geithner said in a speech.
…
With home values declining, last year marked the first time American homeowners, in the aggregate, owned less than half the value of their houses. Their share of home equity — the market value of a home minus the size of its mortgage — dropped to 47.9% in the final three months of 2007, down one percentage point from the third quarter, the Fed said in a quarterly report.Equity as a percentage of home values has been falling from a high of more than 80% since 1945, when the data started being recorded, but that decline generally has been a result of mortgage debt rising faster than home prices.
Lately, the downturn in homeowners’ equity has accelerated, and it is being driven by falling home prices, which is more ominous both for consumers’ net worth and for the loans collateralized by those homes. The decline could portend an increase in the delinquencies and foreclosures that have roiled global credit markets.
“There are more homeowners who are getting pushed to the limit, where they have little equity left in their homes,” said J.P. Morgan Chase economist Michael Feroli. “That makes it difficult to refinance.”
…
The delinquency rate for home loans hit 5.82%, up almost a quarter percentage point from the previous quarter and the highest since 1985, when the rate topped 6%, as many regions of the country were hurt by slumping oil and farm-product prices.The latest increases affected almost all loan types, but were most pronounced for subprime, adjustable-rate mortgages. One out of five of those riskier loans were past due in the fourth quarter, while an additional 13% were in foreclosure.
Housing picture turns much darker
THE ASSOCIATED PRESS • March 7, 2008
NEW YORK — Nervous homeowners and economic analysts have been wondering how much worse the housing market could get. On Thursday they got an answer: Plenty.
Foreclosures are at a record high. Home equity is at a record low. The housing market is spiraling down with no end in sight — and taking people’s sense of economic security with it.
For the first time since the Federal Reserve started tracking the data in 1945, the amount of debt tied up in American homes now exceeds the equity homeowners have built.
The Fed reported Thursday that homeowner equity actually slipped below 50 percent in the second quarter of last year, and fell to just below 48 percent in the fourth quarter.
And that was just one example in a day of dismal housing reports.
The Mortgage Bankers Association said foreclosures hit an all-time high in the final quarter of last year. And pending U.S. home sales — those in the gap between when a buyer signs a contract and when the deal closes — came in below analyst expectations for January and remained at the second-lowest reading on record.
“There is no sign that we’re near the bottom in the housing market,” said Douglas Elmendorf, a senior fellow at the Brookings Institution and former Fed economist. “Housing prices will probably fall for a year, two or three to come.”
The trifecta of reports illustrates a housing market caught up in a “very negative, reinforcing downward spiral,” said Mark Zandi, chief economist at Moody’s Economy.com.
Home equity, the percentage of a home’s market value minus mortgage-related debt, has steadily decreased even as home prices and homeownership rates jumped earlier this decade. That was due to a surge in cash-out refinancings, home equity loans and lines of credit and an increase in no-down-payment mortgages.
Now declining home prices are eating into equity, and economists expect the figure to drop even more.
Economy.com estimates 8.8 million homeowners, or about 10 percent of homes, will have zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households will be “upside down” if prices fall 20 percent from their peak. The latest Standard & Poor’s/Case-Shiller index showed U.S. home prices plunging 8.9 percent in the final quarter of 2007 compared with a year earlier.
http://www.app.com/apps/pbcs.dll/article?AID=/20080307/BUSINESS/803070467/1003
Grim,
I definitely had a laugh at the WOPR.. then a bit of a scare, as I realized how many years ago that actually was. Yikes.
I’m trying to remember if I had my 300 baud modem by then, trolling the BBS’s, I can’t even recall.
Time goes by much too quickly-
oops – wrong thread!
Walking away from home
http://www.msnbc.msn.com/id/8874568/
March 8: With record numbers of home loans in foreclosure or late in payment, NBC’s Michael Okwu reports on a new service helping homeowners walk away from their house.
FLASH: Countrywide Toxic Mortgage (finally) under investigation by FBI, and Angelo Mozilo under SEC investigation too. It’s just a matter of time now
http://news.yahoo.com/s/afp/20080309/bs_afp/usbankpropertycompanycountrywide;_ylt=AhCb6n88hvKgXs29jlK.7vis0NUE