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Wednesday, February 24, 2010
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53 comments:
Big Ben announced again today that rates need to be exceptionally low for an extended period of time. I think this is like when Punxsutawney Phil sees his shadow and every one moans another 6 months of 0% rates :-/
Washington Biz Journal: Underwater mortgages continue to rise
...Virginia had 1,359,820 mortgages on the books with 22.9 percent, or 311,321, in negative equity...
...Washington- Arlington-Alexandria had a negative mortgage equity rate of 31.4 percent at the end of the last quarter...
but many (most?) homes in NoVa don't have any mortgage, i think.
"...Washington- Arlington-Alexandria had a negative mortgage equity rate of 31.4 percent at the end of the last quarter..."
The percentage in Arlington is so low that it's ridiculous to include it in that statement.
MM,
I think it's less than 40% of houses have no mortgage even in NoVa, but that's just off the top of my head. But, yeah, to get percent of houses who's owners are underwater you need to cut those numbers about in half.
I say this is nothing that 5-6 years of amoritization won't fix. Most FHA buyers are effectively underwater the day they close, once you factor in transaction costs.
The current trend is towards paying down debt not accumulating more, so this problem will fix itself, other than for those people who need to move in the meantime for other reasons.
Tom-
Do you have any evidence of this? I agree for SFH in North Arlington this is probably true, but there are a lot of underwater condo owners in all of the buildings that where made over the last couple of years. Also southern Arlington has taken a pretty good beating and I imagine a lot of people are underwater there.
Tom,
Then maybe they included it to keep the number less scary. Hmmm?
And people did HELOC in Arlington too, it's just that apparently more of them did that as a tax strategy for their renovations not as a doomed-to-failure cash-management tool. Apparently.
Cara-
That is a good point. What the article clearly is missing the distribution which is what is important. This area has a lot of people underwater but most of them are only slightly underwater vs. if you look at vegas 5 years of amortization doesn't help because many people are 50+% underwater.
Yes, to be more accurate, it's N. Arlington where the percentage is so low. S. Arlington is entirely different and I wouldn't be surprised if the percentage underwater there was closer to 30 percent.
housebuyer,
Yes, a much more interesting statistic would be what percentage are more than 10% underwater or some such cut. Something that takes more than 5 years of amoritization to recover. This yes or no measure actually obscures the measure of true distress by conflating it with minor temporary set-backs.
Tom-
I am sure that DC and Alexandria also have areas that have as little stress as N. Arlington. I don't know for sure but I would bet Georgetown and Old Town have very little stress, but the reporters don't have enough time to break everything down into 2x2 mile grids to say how things are doing. This is why they they group together large regions
"...Washington- Arlington-Alexandria had a negative mortgage equity rate of 31.4 percent at the end of the last quarter..."
Just so you know, I am nearly certain this is the Washington Metro Statistical Area (MSA) as defined by the OMB.
If so, that area includes not only the local area but about 20 counties in DC, VA, MD & even WV. (despite the fact they call it Washington-Arlington-Alexandria)
http://en.wikipedia.org/wiki/Washington_Metropolitan_Area
Thus, these results shouldn be too surprising given we are talking about PWC, PG county and some of the other usual suspects when it comes to being underwater.
The Anonymous,
Given that they separated out a Rockville Bethesda corridor as well, I really doubt it.
If they can separate out a chunk of the NW suburbs why not the innermost DC suburbs and DC? Why they chose to break it that way is beyond me...
Anon is right. from the story:
...Narrowing down to the Core Based Statistical Areas defined by the Office of Management and Budget,...
MM,
That wikipedia calls our MSA the Washington Arlington Alexandria area lends credence to this,
but then how did they do Bethesda Rockville Frederick? That's not a core-based statistical area. I think as usual you've just got to take the whole thing with a grain of salt, because something is clearly inconsistent here.
Since it's not the number I want anyway (% of owners who are more than 5 or 10% underwater) I'm just not going to sweat it.
"Cara said...
Given that they separated out a Rockville Bethesda corridor as well, I really doubt it."
Cara -- I suggest you look at the wikipedia article. The rockville-bethesda corridor is a subregion of the Washington MSA.
Also, I found this article from FirstAmericanCoreLogic.
http://www.facorelogic.com/uploadedFiles/Newsroom/Mortgage/MP_09_Sept_Full_Issue.pdf
As you can see (on the last page) they refer to "Washington-Arlington-Alexandria", but they refer to the full name "Washington-Arlington-Alexandria DC-VA-MD-WV" Clearly, you would not use this name if you were referring to just DC ARL & ALEX.
Actually, the info is on page 11 not the last page.
Also, they say the "Washington-Arlington-Alexandria" area has 991,000 mortgages, (which is pretty much impossible as it would be more than the population of those areas combined), so I think that clinches it.
Incidentally, this looks to be the previous quarter report to the one they just issued. Looks like the MSA went from 29.9% underwater to 31.4% underwater now.
Three guys on the Titanic...
One at the stern is about to slip into the water and yells at the other two "We're sinking! We're doomed! Doomed I tell ya!".
The second guy up the deck a bit further says "Well, the band is still playing so maybe everything is going to be ok."
The third guy up at the bow as it reaches its peak point rising up before the final slide yells back at the other two "Holy cow! What a view!".
I still think of that story every time I see posts with folks slicing the real estate pie into bizarre slices to separate good from bad.
I still can't understand how one section of a local economy *appearing* to continue to do well bodes well for other sections that are slipping below the water...
Maybe I am just slow that way...
:(
Anon-
It sounds like you are right this is the bigger MSA area. Although it is interesting that the used the sub area but didn't use the full MSA that also includes Baltimore. I assume that Baltimore is much worse off and they wanted to segment that out, but who knows.
Either way you can probably segment it further and yes fewer people will be underwater in the richer neighborhoods and more will be underwater in the poorer neighborhoods. I am not convinced that 30% of people underwater changes where I think housing prices will go. I am pretty confident that we will continue to have shorts and REOs for several more years and the market will just need to adjust and find an equilibrium where this is normal.
"I still think of that story every time I see posts with folks slicing the real estate pie into bizarre slices to separate good from bad.
I still can't understand how one section of a local economy *appearing* to continue to do well bodes well for other sections that are slipping below the water..."
Because while this boat is sinking, unlike the Titanic, we all know it will eventually be repaired and everyone will be nice & dry (be it now, or 20 years from now). With the exception of Contrarian, I think everyone on this board recognizes that.
Thus the question is, before the boat is repaired, will the better doing sections slide fully undwater and drown, or will they merely get their shoes wet?
"Housebuyer said...
It sounds like you are right this is the bigger MSA area. Although it is interesting that the used the sub area but didn't use the full MSA that also includes Baltimore."
HB - it looks like Baltimore is not a subregion of the Washington MSA, but a seperate MSA known as "Baltimore-Towson"
http://en.wikipedia.org/wiki/Baltimore_Metropolitan_Area
The Anonymous,
I did read the wikipedia entry the first time and it convinced me of no such thing. But finding the actual last month's Core Logic report, that must be equivalent to the one from which the article was written does indeed cinch it.
And it answers my other question in a way. 29.9% were underwater in the last report, with 35% approaching underwater, thus at most 29.9% are significantly underwater now if 31.4% are now underwater. Presumably less than that, hard to know.
Anon-
It appears you are might I guess it is not an MSA, although it is a statistical area that is often talked about. I am not sure the exact difference between a metropolitan statistical area and a metropolitan combined statistical area. I guess it is just saying that people often combine these two MSAs
http://en.wikipedia.org/wiki/Baltimore%E2%80%93Washington_Metropolitan_Area
TexasNative,
In that vein the question is, how close is dry land? And can we keep bailing water to stay afloat until we get there? Can owners bail faster than they're taking on water?
People are underwater on their cars all the time, but they keep driving them.
"housebuyer said...
Anon-
It appears you are might I guess it is not an MSA, although it is a statistical area that is often talked about. I am not sure the exact difference between a metropolitan statistical area and a metropolitan combined statistical area. I guess it is just saying that people often combine these two MSAs"
Housebuyer, I agree, its all very confusing. As we are all reasonably intelligent people here, and we cant seem to make it completely clear, I can see how others (journalists, etc.) can be a bit sloppy with their definitions.
The rule of thumb I have devised for determining what is what, is anytime you see any report that says "Washington-Arlington-Alexandria" especially if it has the little "-" between the names, it almost always refers to a much larger area than merely DC, ARL & Alex.
Anon-
That sounds like a pretty good rule of thumb
There is not a SINGLE underwater mortgage between me and my direct neighbors. All those other underwater mortgages and foreclosures won't affect prices on this acre and a half.
You keep thinking that shamrock, but when buyers keep buying better priced properties elsewhere while one of the overpriced places in your neighborhood sits you might think differently.
Jeremy,
I assume he was making a reductio ad absurdum joke.
In that vein the question is, how close is dry land? And can we keep bailing water to stay afloat until we get there? Can owners bail faster than they're taking on water?
No argument here. And I applaud your continuation of my pseudo metaphor between the sinking of the Titanic and the housing mess.
I'm a bit more pessimistic than you or others... I don't see the issue as a question of how long can you bail out a boat before hitting dry land but rather how long can you tread water before drowning (bankruptcy, financial ruin and then "rebirth").
The news from all the economic sources keeps running me in circles. Dead Cat bounce is starting to be my go to expression more and more.
FWIW.
Cara & Shamrock-
There are no underwater renters in my 1100 sq. ft. condo. Although I am 99% sure there in an underwater land lord for this condo :) I keep checking the foreclosure listing expecting to find out that my I will get to bid on my place without having to move :)
So this person bought the house in late 2002 for 330K and is trying to sell it for $585K as a short sale. I am surprised they were ever able to get a loan for enough over $585K that they didn't try and do a normal sale. More importantly if you look at the last picture, they appear to have a bunch of really good liquor. Maybe instead of buying a bunch of grey goose they should have been taking on less debt :)
http://franklymls.com/FX7263201
Texas Native,
Treading water is always a time-limited thing. You will drown, it's just a question of when.
So I view the current delinquencies and NOTS and NODs as treading water, but the underwater owners if they're not in a boat then their feet are touching the bottom with or without a snorkel....
Those treading water are what will continue to pull prices down, but underwater owners, while a rip tide may pull them away from shore, will generally just be the source both of the price stickiness and the long slow flat period.
No one wants to sell for less than they paid, but at least getting your dowpayment back, or at a minimum not having to bring money to the table will be enough for a lot of these people to sell their albatross down the road.
That said, people deeper than a snorkel tube need to start treading, and will indeed be part of the pull down in prices.
In case anyone decides they want a cute barn in Annandale here you go
http://franklymls.com/FX7263092
This is a very unique looking house for our area. Its not really my taste, but I figured its different and pretty inexpensive...
Coming Soon: 5 Million More Foreclosures
the thing I do is go to Google Maps,
add the real estate option, click in a zip code, select for foreclosures
and then see what it says.
Now My preferred take is to zoom out a bit, PG is littered in foreclosures, you see hot spots in Centreville, Herndon, Leesburg,
silver spring,
but you also see a smooth steady freckle pattern.
Pat-
I agree that is a good way to see foreclosures. If you want to see what is on the chopping block for the next month or so you can also look at trustees websites like this one
http://www.bgww-llc.com/sales.asp
"spider said...
Coming Soon: 5 Million More Foreclosures"
Spider -- thanks for reminding me of that report from John Burns. You might have missed this follow up from Calculated Risk:
Register: When will this wave of foreclosures hit, and how will this shadow inventory affect home prices?
Wayne: We don’t believe that the shadow inventory will be dumped onto the market all at once. Although we don’t believe modification efforts will truly save a lot of homeowners from losing their homes, we do believe that these programs are effective in delaying foreclosures and pushing out the additional supply to later years.
Calculated Risk: Burns Consulting doesn't think there will be flood of homes hitting the market - they expect these homes will be lost over a few years - so in their view there will not be "another leg down in pricing".
Sounds pretty L shaped to me!!! Drip, drip, drip...
http://www.calculatedriskblog.com/search?updated-max=2010-02-21T09%3A00%3A00-05%3A00&max-results=
Continuing the whole housing/sinking ship thread...
It also matters just how far your ship sinks. The Titanic sunk in some very deep water, but when Italian frogmen successfully sunk two British battleships with mines in the port of Alexandria in 1941 the battleships only sunk a few feet before settling onto the bottom of the harbor.
It was a huge inconvenience for the Royal Navy but the battleships were ultimately repaired and returned to service.
The question for the housing market might not be "is the ship sinking?" but rather "how far down is the bottom?"
A bunch of articles have come out recently saying that mortgage rates likely will not go up that much when the fed stops buying MBS like this one mbs article
Many of these articles are much more concerned about what will happen when the fed starts selling the MBS $1.25 Trillion of MBS. Personally I just don't see this happening any time soon (at least a couple of years from now) and I don't think they will sell it quickly. MBS are paid down at 10-20% a year from either people selling their house or being foreclosed. So if they wait several years it will be significantly more manageable to sell off their MBS holdings.
I think this will also be the Feds way of monetizing a couple hundred billion dollars to "help" reduce the deficits.
housebuyer,
that really is a cute home, I don't think I really like the kitchen though, but has huge curb appeal for me.
There is a Metropolitan division and
a metropolitan statistical area.
According to OMB they got rid of MSA in favor of Divisions, there is a
subdivison for rockville frederick,
so, that's why we see stats on that.
31% underwater? that's bad.
i agree that how badly underwater matters also, but, anyone who bought after 04, is most likely underwater.
pat,
also need to figure that if it's 31% of mortgages that it might not be that bad around here if more homes do not have mortgages, but I don't know that data.
Wunderbar-
Thats why I posted the house it has a lot of cute appeal depending on your taste. It is also in a pretty convenient location for a lot of peoples jobs so I figured there might be a buyer out there. I am actually curious if the house comes furnished. They say it is a foreclosure, but all of the pictures show stuff in the house. I wonder if someone left all of that.
"Contrarian said...
Ain't denial wonderful?"
Well, given your lack of modesty about continuing to post here, I would say yes.
As an aside, just for our records here, can you tell us the date you engaged in the GREAT CONTRARIAN COMMENT DELETION CAMPAIGN OF 2009-2010? I would like to know because your actions are the ultimate "contrarian" indicator for the rest of us.
This started the day you chastized MM about not selling all his stocks ASAP. That was within a day or two of the absolute bottom of the stock market and marked the beginning of the enormous rally we have seen for the last 10 months.
Likewise, the day of your furious deletion campaign is the clearest sign of the bottom to the real estate market we have ever seen.
Further, the day you finally come to Jesus -- the day you finally decide your high priest Bob Precter is a false prophet -- the day you decide houses will not fall 90% -- and you finally decide to purchase in say 2021, 2022, etc. Please let us know that date as that will mark the PEAK of the market and the clearest sign ever that its time to sell.
I wonder what year the MSA names were decided. I suspect they were decided when Washington-Arlington-Alexandria were the only job centers. Probably if they named it today it would be something like Washington-Arlington-Alexandria-Fairfax-Reston-McLean-Vienna-Rockville-Bethesda-Silver Spring-Gaithersburg-Dulles or something crazy like that. ;)
pat,
Thanks for the tip on the google maps. I was unaware of that feature. But most foreclosures on the map would not necessarily be available anymore, right?
If you are following foreclosures is there a website that is more reliable, with more current info?
the thing about the google maps or Hotpads is it gives you a spatial feel
TBW said:
"Arlington-Alexandria were the only job centers. Probably if they named it today it would be something like Washington-Arlington-Alexandria-Fairfax-Reston-McLean-Vienna-Rockville-Bethesda-Silver Spring-Gaithersburg-Dulles or something crazy like that. ;)"
Oh no, TBW. The feds HAVE named it as the Washington Baltimore DC-MD-VA-WV-PA area for calculating federal pay rates. Bet you didn't know that the DC area incorporates Beckly, Hampshire, Jefferson and Morgan counties in WV and Adams and York counties in PA.
S'true. http://www.opm.gov/oca/10tables/locdef.asp#w
Just picture what consistency would do to local housing stats. :)
Also, they say the "Washington-Arlington-Alexandria" area has 991,000 mortgages, (which is pretty much impossible as it would be more than the population of those areas combined), so I think that clinches it.
Hardly. If this is the metro area they are labeling as such, it's over 5 million, and Fairfax County alone is over 1 million.
"Vanka Vstanka said...
Hardly. If this is the metro area they are labeling as such, it's over 5 million, and Fairfax County alone is over 1 million."
Uhh, it looks like you missed the substance of this debate. Originally it was suggested the Washington-Arlington-Alexandria moniker designated only those areas (and not the larger metro area).
Thus, given that the total population of just these three areas (again not the whole metro) was 700-800K or so, the fact that the article referenced 991K+ mortgages clearly indicated this was talking about the whole metro area.
Vanka-
I think there are 5 Million people but there are only a couple million families and only ~1 million that both own a house and have a mortgage
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