3 posts tagged “mortgage madness”

According to several recent articles from well respected financial news organizations, such as bloomburg, Foreclosures DOUBLED in September.  (Read the article here.)

As always, the devil is in the details and I want to point out one little quote:  ``The truth of the matter is that borrowers are going into default as soon as they hit their adjustments,'' said Rick Sharga, executive vice president of marketing at Irvine, California-based RealtyTrac.

To understand why this is the real news in this story, you need to understand that we are only at the beginning of the Loan Reset cycle... which peaks in March of next year!  (source here)

Adjustable Rate Loan Resets For 2007–2008

Month           Millions
January-07      22
February-07     25
March-07        35
April-07        37
May-07          36
June-07         42
July-07         43
August-07       52
September-07    58
October-07      55
November-07     52
December-07     58
January-08      80
February-08     88
March-08        110
April-08        92
May-08          76
June-08         75
July-08         50
August-08       35
September-08    26
October-08      20
November-08     15
December-08     17

The current market is already being described as worse than the S&L disaster in the 1980's (see article here) and we aren't even at the peak yet. 

Of course, this means we will also see sharp rise in personal bankruptcy along with a contraction in consumer spending. 

Let's see how long it takes before we hear the "R" word.

Media Tidbit:
I'm currently digging UK phenom, Kate Nash.  Here is her hit (in the UK): FOUNDATIONS

01_-_foundations_128_lame_cbr

Kate Nash

Well, it's been too long since I posted.

As you may recall, my friend Burton Orwig passed away.  I've been kind of blue about that and haven't felt like doing much.  I seem to be getting over it and now I'm hoping to be back on track.

When I last posted, I bragged how I had I traded my 2004 Mazda RX-8 (worth about $16K but with $14.5K debt) for a 2005 Chrysler Convertible (new debt $11K).  I'm hoping this will jump start my debt reduction by reducing the amount of debt on my balance sheet (3.5K) and freeing up some operating cash to accelerate my debt repayment.

It's only been a couple weeks, so I can't report much progress (yet).  However, I am thoroughly enjoying the PT Convertible!  It's not that exciting as a driver's car... in fact it sort of wallows on it's overly soft, floaty suspension... but it IS a convertible and I've found that I love, love, love to drive with the top down (and tunes playing!).  I'm feeling very positive about this purchase.

I continue to be obsessed with the financial news, which has been all horrifying!  The Sub-Prime Debt fiasco is causing major market volatility and it is very unclear how this will effect the US Economy.  In the past, I've been thinking we are headed to a debt crisis in America.  If anything, I think I may have underestimated how bad the situation could be.

The past 7 years have seen an unprecedented (debt-fueled) real estate binge.  I've been railing for several years that the fundamentals are out of whack, especially here in Southern California.  Prudent financial guidance has been been drowned out by the Real Estate and Mortgage marketing machine touting a house as a "sure bet" and "safe investment." 

Reality Check:
Amount $1 invested in stocks in 1963 would have compounded to today: $12.36
Amount $1 invested in real estate in 1963 would have compounded to today: $1.79

(That data is sourced from www.stopthesqueeze.com <= a wonderful anti-debt site!)

Now that the housing market is tanking, I'm hopeful.  May cooler heads prevail!

Enough of the "dismal science" of Economics... How about some Music!? 

Today's Media Tidbit
I love DJ Paul V's podcast, The Smash Mix.  It is sponsored by some radio station, but I bypass the station site and get the mix directly from DJ Paul's site (http://www.thesmashmix.com).  Here's his latest SmashMix:

DJPaulV_SmashMix118_8_3_07

DJ Paul V

Lately, I'm feeling very, very smart.  I've been highly skeptical of California Real Estate for several years.  I went so far as to sit out the market, which I believe to be overvalued.   Now, it's too soon to know if I'm right, but evidence is stacking up. 

Part of the reason I believe it is a bubble is the amazing "herd mentality" involved.  The topic of California Real Estate absolutely makes people nuts.  Rather than assessing it as "a purchase that you live in," people get all starry eyed as they count their future appreciation.  They never stop to ask if the price "makes sense" (maybe that should be cents!)

My hometown, Rochester NY, has sat out this insanity.  Their property values have risen in a way consistent with the historical mean.  When I talk to my sister or my friends back home, they are quite bemused by the insanity of the real estate boom in California.

But what has happened in California (and Florida, and Nevada, and Arizona....) is quite common in our history.  What we've lived through over the last few years is a classic bubble.  Learn more about bubbles and the related mania here.  The think to remember about bubbles is that they always end badly for those that get sucked in!

Like I said earlier, I'm feeling smart because the evidence is piling up, BIG TIME

Firstly, those that bought with the belief they "could not lose money" in real estate are still clueless and have no idea what they've signed on for... and when they figure out the reality of their debt slavery, they make decisions that would shock many... I'm not talking about bankruptcy but things much, much more drastic.

While so many are blindly keeping their head in the sand, foreclosures are becoming rampant and pricing reality is starting to catch up with people.  Many are resisting the inevitable and trying almost anything stay afloat, but it's not working.

It's important to note, that this bubble was created by cheap credit and now the "collateralized securities" markets are in free fall.  Any hope of new buyers propping up the market is gone because the banks have stopped making loans.

The question becomes, how bad will it get?

Personally, I'm planning to profit from all this... as I believe that anyone that is debt-free and has cash on hand in 2010 will have the world by a string!  I just hope I can turn my finances around in time! 

ENOUGH BUMMER TALK! 

Media Tidbit
in honor of the above post: Anxiety (Get Nervous) by Pat Benatar... gawd, she was great!

Pat Benatar - Anxiety (Get Nervous)

Pat Benatar