We are having so many foreclosures
I just read the following news report…
U.S. home foreclosures jump 90%
Bank seizures of U.S. homes almost doubled in January as property owners failed to make higher payments on adjustable-rate mortgages. RealtyTrac reported repossessions rose 90% last month from the same period a year ago to 45,327.
Total foreclosure filings, which include default and auction notices as well as bank seizures, increased 57%. Defaults among sub-prime borrowers and those unable to meet rising payments on adjustable-rate loans drove foreclosure filings to the highest since August and the second-highest since RealtyTrac started keeping records.
More than 1% of U.S. households were in some stage of foreclosure during 2007.
I can’t help but wonder what the real cause of this “foreclosure crisis” is. I am sure some of these people who got some of these adjustable rate mortgages (ARM’s) just assumed that if the lender was willing to lend the money, then it must be okay.
Some probably had no idea what they were getting into. Some probably thought the rates would never rise. Some were probably banking on a promotion or a raise to cover it if the rates went up. Some may have been tricked by lenders (which seems very stupid on the part of the lenders – I mean who really wins when they default on the loan?).
Do you think that if people really would have known what would be going on a few years later they would have behaved the same?
The housing market is obviously in a slump now, but just like everything else that moves in cycles – there will be a housing boom to follow. Maybe not as big as the one a few years ago, but no doubt housing will boom again in a few years.
I wonder if lenders and buyers will repeat the folly?
If you happen to be one of the home-owners getting squeezed by the raising rates, do you have an insight on the situation?
{ 4 comments… read them below or add one }
I think that if people don’t repeat the folly in real estate, they’ll repeat it somewhere else.
Remember when tech stocks were the big thing and then they went bust? Real estate came next, and suddenly you couldn’t lose by buying a house. I’m sure something else will come along soon to be the “next big thing”.
The best solution: diversify!
@Becky
I agree, we seem to have this irresistible urge to go after the big thing that everyone is buzzing about at the time – but yet the truly wise ones are getting fearful when everyone else is excited…
I’m not sure if you know this (your comment above seemed to indicate that maybe you didn’t?), but the lenders weren’t the ones tricking people. It was the mortgage brokers (not to cast too broad a net). They would “trick” someone into a loan and then sell the loan to someone else. The mortgage broker would collect origination fees, etc. and pass the risk on to someone else. That’s why people keep talking about the securitization of mortgages causing this meltdown. People would originate mortgages and package them up and sell them as bond securities. So in the end the person who loses is the person left holding the mortgage, not the original lender.
@paul
you are right, I was using the two as synonyms and I have shouldn’t have been – thanks for the clarification…