Property Grunt

Wednesday, July 29, 2009

Far from over

The financial version of this is just around the corner.

This was posted yesterday.

Prepare for more foreclosures … many more

Published: July 28, 2009 - 3:01 pm

The deluge of home foreclosures swamping New York is nowhere near over, a report from the U.S. Government Accountability Office shows.

The GAO study released Tuesday predicts that the number of foreclosures on homes backed by subprime or low-documentation mortgages could easily double in the coming months or years, which could put tremendous pressure on housing prices throughout the city and suburbs.

Residents who took out subprime or low-doc loans to buy homes earlier this decade had defaulted or were delinquent on 53,000 loans in New York state through March 31, the GAO said. That dwarfs the 33,000 subprime or low-doc borrowers who had already completed foreclosure proceedings by the spring. At the time, banks had begun the foreclosure process on 28,000 homes backed by subprime or low-doc loans.

The bleak data are part of a national survey of “nonprime” mortgages prepared for Congress by the GAO. The study shows just how sloppy mortgage originators became during the housing boom. Of the 14.4 million mortgages provided between 2000 and 2007 to U.S. consumers with tarnished or poorly documented credit histories, 1.6 million had been foreclosed as of March 31, another 600,000 were in foreclosure proceedings and another 1.3 million were “seriously delinquent,” the GAO said.

Of course, some other states, such as California and Florida, face even worse problems than New York does. In Florida, the fourth-most-populous state, the proportion of subprime or low-doc mortgages in the foreclosure process is six times higher than New York’s.

But that will be of little comfort to New York City residents trying to sell their homes in areas already riddled with foreclosures, with more to come. The city’s eastern precincts, already pounded by foreclosures, seem likely to suffer the most. For example, in both the 6th Congressional District, which stretches from Jamaica, Queens, to JFK International Airport, and the 10th Congressional District, which goes east from downtown Brooklyn to Bedford-Stuyvesant and Canarsie, 35% of all active subprime or low-doc loans are deemed seriously delinquent.

This is a vicious cycle that is caused not just by the real estate meltdown but by unemployment, drop consumer spending and credit cards.

Then we have this:

SEC rule on 'naked' short-selling now permanent

WASHINGTON — Federal regulators on Monday made permanent an emergency rule aimed at reducing abusive short-selling, put in at the height of last fall's market turmoil.

The Securities and Exchange Commission announced that it took the action on the rule targeting so-called "naked" short-selling, which was due to expire Friday.

Short-sellers bet against a stock. They generally borrow a company's shares, sell them, and then buy them when the stock falls and return them to the lender — pocketing the difference in price.

Naked shorts is considered among the many factors that exacerbated last year's credit crisis.

This is just more evidence that buyers have every right to be as picky as possible. And it might be best simply to sit it out and watch everything implode. Then pick up the pieces when it is all over.

Sellers, unless there is an urgent need to move or need for money, it might be best just to wait it out till the next cycle comes.

If you are seller that is in dire need to dump your property, then you have no choice but to be extremely aggressive. Not just in the price but also in marketing. Especially if you hire a broker. Make that broker work for their commission. The broker has to advertise where the money is.

And where is the money?

As I have discussed in previous entries it is in China.

A Better Tomorrow

Peasants with money

Jews with Chopsticks

If your broker is only advertising through the New York Times and his company website then you are going to have a harder time to sell. Tell them to advertise in the Chinese newspapers and online resources where rich Chinese congregate. If they refuse, fire them and find someone who can.