Tag Archives: unemployment

Mortgage Delinquencies Q2 2009

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mortgage delinquencies Q2 2009

Here are some fantastic data from the CDPE organization which closely tracks national industry numbers.

As of Q2 2009, here are some numbers for you to digest

Type of  Mortgage            In Foreclosure                      In Default (30+ Days late) Total

All Mortgages                               4.3%                                                      8.86%                                                             13.16%

Sub Prime Mortgages               15.05%                                                25.35%                                                           40.40%

Prime                                                 3.00%                                                  6.41%                                                                 9.41%

It’s not surprising to see that sub-prime loans represents over 40% of distressed properties out there.  As of the end of Q2  2009, however, distress in prime mortgages (or the Mercedes of mortgages) represent roughly 1/4 of the volume of sub-primes mortgages. This may surprise some people, as we have been repeatedly told by the media, that sub-prime market is what brought our economy down.   However, with National Unemployment at 9.4% (as of July 09 when these stats were released) , it is no longer those who gambled on high risk mortgages, but the regular people who were doing the responsible things, who are being forced into default.

I believe the sector of mortgages to look out for in the coming months is the prime market.  I argue they will rise dramatically in numbers, relative to sub-prime mortgages.

Additional statistic I want to point out are marked in red above.  4,760,000 represents the total volume of home sales NAR predicted for 2009.  9,550,000 represents the total distressed properties in the nation as of Q2.  This means if these distressed properties have to be sold to get homeowners out of their situation (either as a short sale or foreclosure), it will take over two years to  unload the current inventory of distressed properties!

Some food for thought………

California unemployment rate hits 12.2% in August

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unemployment-california

Article

Talking heads on TV complain that the US will hit over 10% unemployment by the end of this year and are concerned about the negative impact that will have on the economy, blah, blah, blah…… Yes, it is rough for everyone out there and we should all be concerned.

But want to know how things are playing out in our own backyard?  California has hit 12.2% unemployment in August 2009! That’s the highest ever since such data was tracked.

“Only Michigan, Nevada and Rhode Island, at 15.2%, 13.2% and 12.8%, respectively, have higher unemployment rates than California. The national unemployment rate in August was 9.7%.”

As I have been saying repeatedly, until we can resolve this issue of unemployment, foreclosure will continue at records levels, unless we can address one of the root causes: unemployment .  People simply do have have sufficient cushion in their savings to allow for sustenance during their unemployment.  Luckily, the government is aware of this situation and have started talking about helping out the unemployed stay in their homes.

We will have to see how this effort turns out, but at least we are headed in the right direction.

$8,000 tax credit may be extended

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Just like cash for clunkers, any Realtor will tell you that the first time homeowner credit has been wildly successful in getting fence sitters to come down and buy homes.  It’s a simple fact: the $8,000 tax credit is sufficient incentive here in California.  With nearly 12% unemployment here in Silicon Valley, the additional sales of homes will have a trickle down effect and give employment opportunities to Realtors, loan brokers, lenders,  property inspectors, termite inspectors, title company employees, contractors, gardeners, Home Depot employees, etc……. who, in turn, will spend money and give other industries opportunities at employment.  We need to get the housing sector back on its feet as it is the one which initiated the fall of our mighty economy.

Silicon Valley foreclosure on the way down?

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20050817-mr_housing_bubble

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The above article boldly declares that foreclosure activities have dropped 18% reduction in Notices of Default being issued and 11.5 % reduction in Notices of Trustee Sales last month in Silicon Valley.  On its face, that seems like fantastic news, but we have to now consider something which happened today. How will the law which enacted a moratorium to stop foreclosures ending impact the activities in the coming months?  Of course only time and data will tell…….
However, the above question may be a moot point unless the two root  causes of foreclosure are addressed in California: unemployment and  the looming option ARMs problem.   Unless these powerful forces are somehow resolved or mitigated, we may be looking at years of foreclosures to come.

Economists says foreclosure situation seems to be better….. are they?

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News Article Here

So which group of economists is correct, are foreclosures truly decreasing or are they going to be increasing?  Depends on the data, I say.  As a San Jose Short Sale agent, what concerns me are the two items mentioned in the article.  First, I think everyone will agree that unemployment will be a driving force behind foreclosures in California. Unless we can find jobs for California’s 12% unemployed, even with loan modifications, it’s just a matter of time before these folks will face foreclosure.  The mortgage modifications for most people will simply delay the inevitable by a few more months, unfortunately.

Secondly, there is the issue of the wave of re-setting adjustable mortgages which are scheduled for the next couple of years, chief among them the deadly Option ARMs. Once  these start to re-set (and California has the most Options ARMs of all other states),  in conjunction with high unemployment rates, we are going to see some serious carnage.  I hate to sound so pessimistic, but those are the fact that I see driving foreclosure activity in the coming few  years.

The real face of the recently unemployed

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http://www.latimes.com/business/la-fi-economy5-2009sep05,0,3045652.story

The interesting part of the article for me was not about unemployment rising from 9.4% to 9.7% in July, but the part about the new  face of the laid off employee.

“During the previous two recessions, in 1990-91 and 2001, people in their mid-40s to mid-50s continued to show employment gains as younger workers felt the brunt of the cutbacks. But since the current downturn began in December 2007, employment in the 45-to-54 age group has fallen by more than 1.2 million, according to the Labor Department.”

The trend is troubling because that prime earning age group of 45-54 are will represent a high number of homeowners who will be unable to make their mortgage payments and will quickly fall into default status.   A study I read revealed most American households are unable to survive longer than 2 months if there is disruption in the income.

Unemployed workers have a difficult time getting another well paying job in 2 months……

Prime borrowers delinquency rate increasing

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Unfortunately, the prime borrowers are now failing to pay their mortgage rates at an increasing rate; I am seeing this more and more as a San Jose Short Sale Agent.  This trend becomes problematic as the prime market represents 80% of the mortgage market. The delinquency rate for prime borrowers is at 6.4%, compared to sub-prime borrowers whose delinquency rate is an astonishing 25,4%!

The unemployment issue which is devastating the economy is the culprit behind this problem and makes it difficult for this segment whose good credit scores  would otherwise have given them access to either credit or equity in their homes to ride out their unemployment in the past.  Such options are no longer available to them.

1 in 10 in California in mortgage payment default.

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New data released reveals that 9.5% of home loans in California are in default. Sub prime loans seem to be the concern of the past and now unemployment seems to be the number one reason why people default on their loans from my discussions with clients as a San Jose Short Sale Agent. The data is fairly consistent with California’s unemployment numbers.

Although we may already have by-passed the bottom of the housing market, in order for us to see dramatic improvement, we must address the unemployment issue.  Want to see more people buy homes?  Give people sense of security about their jobs.  People who feel secure about their employment buy homes.  People who are insecure about their employment status do not buy homes, even if they have the financial wherewithal.

Given that NUMMI is shutting its doors and laying off 4,300 employees and CISCO just having laid of 700 employees, it seems pretty certain that we in Silicon Valley will be seeing an increase of default activities in the coming months along with an increase of unsold inventory.