PatriotsReign

Please consider this article as just more evidence that our media (and our gov't) continue to slant economic news in an overly positive light.

Despite the headline "Foreclosures plunge 27% - biggest drop on record", if one reads the actual article, all it does is discuss how bad the housing market truly is and how the foreclosure numbers are misleading. It says that banks are just slowing the process down to make sure they have the proper documents.

But for those who just glance at the headline, at least they'll get a nice glow from a false sense of hope...

Foreclosure filings plunge 27% compared to last February - Mar. 10, 2011

"That was the biggest year-over-year decline the company has ever recorded. But the improvement may be exaggerated, according to RealtyTrac CEO James Saccacio, who traced some of the decline to the fallout over robo-signing issues.

The foreclosure fall flew in the face of other housing market reports that made it clear that housing is far from being out of the woods. S&P/Case-Shiller reported that prices are going down, and Zillow, the real estate website, said nearly 30% of borrowers with mortgages owe more than their homes are worth."

For those who have the stomach to watch/listen to an interview with Michael Feder, you can easily understand the bleak picture that is our housing market.

Excerpts:

"We are terribly concerned with what is ultimately the pain that has to be taken. The number could approach aggregate mortgages 5 or 6 trillion dollars. The question is how much of that is overhang and how much of it has to be written off."

"NAR says based on inventory and absorption rates we have little over 8 months supply. The reality which you add up all the houses for sale, houses vacant not yet on the market, houses underwater, seriously delinquent, in foreclosure, almost in foreclosure, the number is closer to 60 months, 5 years"

"Who is going to absorb the foreclosed homes?"

Feder Interview on Housing - Video - Bloomberg

__________________
"No one walking this earth knows what is truly righteous"

PatsFanInVa

...meanwhile, also consider the fact that nobody has been buying since at least 08, although those tepid sales are measured against the top of a bubble. Devil's advocate position. While liquidity is creeping back in you still need way better credit to borrow - way better than you've needed in decades.

So here we are with the overhang, and nobody wants to lend, but are grudgingly allowing for the lending to resume as public money is pumped back into the public's hands through stimulus measures. Unemployed guy has a check, grocery driver guy keeps his job, store assistant manager makes enough money to go from renting to buying, and if he isn't still waiting for prices to plummet again, 1 more unit goes off the market.

Question - what does a foreclosure moratorium do to the markets? That is, other than how much you and I and everybody would hate being the good people who pay their mortgage while the other guy skates?

Just in market terms without thinking psychologically or morally... then we can go back and factor in the effects of moral hazard, because I don't just disregard that.

So again, in market terms -- what if we have a moratorium on foreclosures for, let's say, 3 years? (Or a tightening on requirements, similar to the tightening up of the bad paperwork that people are finding they can't use to evict delinquent borrowers?)

PFnV

PatriotsReign

All great questions! And as you know, nothing in economics happens in a vacuum. It's a "ying & yang" thing from top to bottom.

Putting a moratorium on foreclosures could result in any or all of the following:

-The economy continues to stagnate
-Housing unit inventory falls
-Home prices rise or stay flat
-People stop paying their mortgage. Especially those who are deep under water
-Home builders slowly begin to build again (due to slowly diminishing supply)

And I could add to the above list, but those are the obvious results.

The catch here PFiVA is, we'd all know the moratorium would come to an end in 3 years. And we also know, when the 3 years is over, prices will fall and fall fast.

None of the above results of a moratorium would put people back to work. And we have to acknowledge that the #1 contributor to unemployment AND our economic recession is our depressed real estate market.

After all, it is "THE REASON" we are where we are today. Nothing affects our economy like home sales. People buy funiture and appliances, drapes, rugs, new floors, paint, paint brushes, drop cloths, ladders, "Welcome Home" signs and cute little napkins to go on the new dining room set...hey, maybe even a pool table...I think you get the picture here.

But a moratorium isn't going to stimulate home SALES, change the unemployment picture or even drive the economy back into prosperity. It would just slow things down, which may even be worse than allowing foreclosures to continue.

On another note. Lets say Schiller is right about home prices falling another 15-30%. I was one of those who actually did purchase a home in 2010. Would I stay in my home if it's value dropped $60-$90k? Would that be the "moral" thing to do?

I don't know, but let's ask ourselves what our banks did when the RE market crashed.

WOW!! They didn't lose much because WE bailed them out! So it's us (and I think you agree) who's left holding the bag. And I'll tell right now, if my home drops 25%, I think I'll just walk away and buy another house for way less money. You may ask, "how will you do that when your credit will be in the tank?". Well, I'm already discussing buying a home with my parents (with an in-law) in the near future. They currently live in a "Cape-style" home and my siblings & I prefer they move into a one-story home to avoid going up & down stairs. But it's their choice and they have already said they want to do it. So we'll buy a home and put it under their names if we have to.

Would I be/feel irresponsible for doing that? Not in the least. As a matter of fact, I think it would be "the right thing to do"

P.S. I would like to read your opinions on how our economy and our people would benefit from a 3-year moratorium on foreclosures. How would it help the real estate market, consumer spending, unemployment and ultimately, our economy?

__________________
"No one walking this earth knows what is truly righteous"

Mrs.PatsFanInVa

Good, PR, you do that. And forgive me if I hope your parents end up in a nursing home and all of their assets, including "your house" get eaten in nursing home care - because you can't do both things you've said you're going to do....one of which being, as you've told us previously, having your parents put their home and everything else they own in their children's names before the Medicaid "look back," period and now this, buy a home for yourself and put it in your parent's names.

And you can call me nitpicky all you want but I'll tell you right now, I don't judge you any less harshly than you judge anyone poorer than you who scams the system by going to an ER without insurance or collecting food stamps while working a "cash only" job.

One scam at the taxpayer's expense is no different than any other scam at the taxpayer's expense - the only thing that separates them from you is necessity vs greed.

PatriotsReign

Tisk, tisk, tisk now MrsP

You're misrepresenting me here, so I need to set you straight.

The FACT that my parents decided to put their money in their children's names has NOTHING TO DO WITH ME.

My father's parents did the same thing for him and his siblings, so if you want to "RANT & RAVE", which you are, then aim it in my elderly parents' direction, not mine.

But my, how I do love your spunk!

By the way, my parents will sell me "Our" house shortly after we move in. There are ways around everything MrsP...just ask our wealthy class! At least I have the $8K from my "first time home-buyers stimulus" so I can pay for our closing costs!

__________________
"No one walking this earth knows what is truly righteous"

The Brandon Five

Part of the reason that credit is tight is because of newfound aversion to lending risk (now that they can't pass it on to third-party rubes). A moratorium on foreclosures will raise the cost of borrowing (more risk to the lender) and make available credit even tighter (investors/lenders worry about return OF their principal as well as return ON principal).

The Brandon Five

The transfer of assets might have had "nothing to do with you" (really, no paperwork?), but if they enter a nursing home you should rightfully use those funds to pay for their care and not pass it on to your fellow citizens (or more to the point, not pass it on to the next generation who have enough cleaning up to do).

PatriotsReign

No, I personally did not engage in any "paperwork", but my sister did.

God only knows if my parents will need to be put into a nursing home or not. But based upon your logic, the average middle-class family shouldn't inherit anything from their parents if their assets need to be used to pay for nursing home costs, but at the same time, those who are WEALTHY can leave their assets to their children because, well, I guess it's because they're wealthy, right?

Using your and MrsP's logic, very few lower middle-class parents would be able to leave anything for their children or loved ones. In my opinion, it is FAR more important for middle class parents to be able to pass something on their children than it is for those that are wealthy. That isn't acceptable to me, but maybe it is to you.

Let's say that parents of a typical lower to moderate middle class family has $200,000 dollars in assets that they want to leave to their children. The fact that they are able to do this gives them both a sense of pride and peace. They have 4 children, none of whom are financially secure and are scrambling to save enough money so they don'thave to retire in poverty. In this example, both parents need nursing home care and all of that is wiped out, leaving nothing for their children.

While the family 2 towns over have amassed over $2 million in saving and will be able to leave over 90% of it to their children despite the fact that all of their children are very wealthy as well.

If you can rationalize that for me, I'd love to read it. I'll allow you to state your case.

If your rationale is, "Hey, life isn't always fair", then don't waste our time.

__________________
"No one walking this earth knows what is truly righteous"

Mrs.PatsFanInVa

I wonder what it does to a person's feeling of "pride and peace" to know that they are spending their dying days on welfare - usually a principal of life that they've lived their whole lifetime trying to avoid?

I wonder what it does to their "pride" to know that a large majority of taxpayers think they (and their children) are deadbeats and welfare-cheats?

What a very peaceful knowledge to spend your last years thinking about......

Interesting that you think it's ok for you to do because those you so admire, the wealthy, also find legal loopholes to slip through. Why is it you do not admire the welfare mother who has one more child so that her welfare check increases, too? After all, you're all living off the legitimate taxpayer's dollar. You've all scammed the system. What's the difference between the three, PR? The degree of magnitude?

Besides which, you're ragging on us for the wrong thing. We've never said we think it's ok for the wealthy to escape paying their fair share so any comparison you're trying to make is moot. We've been consistant in saying that the $2million dollar family ought to pay taxes on their inheritance just as we're saying that all people are responsible 100% for their own care before leaving an inheritance.

You can rationalize it all you want - they don't call it "hiding your assets" for nothing. People who do it are cheating those who do not. It's that simple.

And you may insist all you want that "you" had nothing to do with your parent's decision to hide their's - but there's no way in hell you can deny that your "plan" to walk away from your own mortgage with the express intention of buying a home in someone else's name, knowing that they are going to "gift" you the house is still immoral, unethical and illegal.

chicowalker

PR, why should the taxpayers take care of your parents' nursing costs -- isn't that basically a subsidy for you and your siblings?

Are there other expenses that people should be able to put onto the rest of the public, or is a nursing home the only one?

(I'm now wondering -- arer you opposed to universal healthcare? because if you are, the 2 positions would seem contradicory, at least on the surface)

Now, I agree with you that the wealthy (we don't need to get into how to define that) should pay more than 10% on what they inherit-- but that's a different issue.

(btw, please don't take any of this personally -- it just happens to be the example you brought up here)