Over 1,000,000 Strong and Growing - the U.S. Subprime Debacle Goes Prime
Between the information on Realitytrac.com (referenced below) and that from Forbes.com (ditto)it appears that while the housing crisis has faded from the head lines it is still running strong in reality land.
Realtytrac is particularly useful because it gives a lot of hard numbers and those give a harder, firmer look at what is going on than any hyperbolic lip flap from candidates or pundits.
IRVINE,Calif. – Jan. 29, 2008 – RealtyTrac®(realtytrac.com),the leading online marketplace for foreclosure properties, today released year-end data from its 2007 U.S. Foreclosure Market Report,which shows a total of 2,203,295 foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 1,285,873 properties nationwide during the year, up 75percent from 2006. The report also shows that more than 1 percent of all U.S. households were in some stage of foreclosure during the year, up from 0.58 percent in 2006.
Before going any further, it's important for us all to know that Realytrac is an industry group and this piece was listed among its press releases. I am assuming – and that may be too optimistic – their numbers and facts are correct. Mea culpa for any errors resulting on that assumption.
For itspart, what Forbes has to say is a bit scarier, at least to middle America.
Brinkman said that while subprime adjustable-rate mortgages represent 6.0% of the loans outstanding, they represented the lion's share, 39.0%, of the foreclosures started during the first quarter. Prime ARMs represent 15.0% of the loans outstanding and 23.0% of the foreclosures started.
In absolute numbers, there were 195,000 new subprime foreclosures,an increase of 20,000, while there were 117,000 new prime foreclosures, up 29,000 [emphasis mine - Mikasi].
The big trend was the jump in prime foreclosures from last quarter suggest that the subprimecrisis has spread to more reputable paper.
Also, they make a prognosis about what is likely to result from this debacle in the securities scene.
Arizona,California, Florida and Nevada account for a quarter of outstanding homeloans and 42.0% of foreclosure starts, the industry group said. "The magnitude of the problem there is kind of dwarfing developments in the rest of the country," said Brinkmann.
The rise in default among prime and near-prime loans does not bode well for the asset-backed securities they compose. Write-downs related to worse-than-expected performing mortgage-backedsecurities have already cost Wall Street an estimated $250billion.
Realtytrac's CEO sums sums this entire mess up like this -
“The year ended with a monthly increase of 7 percent inDecember, making it the fifth straight month with more than 200,000foreclosure filings reported and giving the fourth quarter thehighest quarterly total we’ve seen since we began issuing ourreport in January 2005,” said James J. Saccacio, chief executiveofficer of RealtyTrac. “It also pushed the foreclosure filing totalfor 2007 well over 2 million. And while filings were up 75 percent,the number of properties in some stage of foreclosure was up 79percent, indicating that some properties may have just entered theinitial stage of foreclosure in 2007 and could be going throughthe rest of the foreclosure process in 2008 — unless lender andgovernment intervention efforts begin to gain more traction.”
The site gives two tables detailing the foreclosure ratesby state over the last year. For the record, the top three states forforeclosures in 2007 were Nevada (3.4% of households), Florida (2%+)and Michigan. California, Colorado, Ohio, Georgia, Arizona, Illinoisand Indiana rounded out the top ten.
But that's just thisyear - from the look of things we'll be hearing about this well into2009 and maybe beyond.