Shrugging off Friday’s employment losses and another 5 banks going to the receivers. Stock rose strongly to begin the week on little real news. We do however have some interesting developments related to real estate. First up a piece Sunday in the Orange County Register that featured an interview with First American CoreLogic senior economist Sam Khater. Who stated that the lack of foreclosure inventory is a mirage caused by foreclosure moratoria, loan modification programs and servicer backlogs. In addition to the reduction in REO inventory brought on by the homebuyer tax credit. This was joined by a report last week from the Center for Responsible Lending stating that a tsunami of foreclosures is about to swamp California. As an aside B of A made a similar warning last month. The Center warned that more than a million foreclosures threaten to overwhelm the economic recovery in California as the report referenced a study by Deutsche Bank that figured 54.3% of California homeowners were underwater at the end of the first quarter 2009. That this figure would rise to 67.9% of homeowners statewide within two years, citing unemployment and ARM resets as big drivers of foreclosures. But what is significant here is that which is implied but not stated directly. If underwater mortgages are expected to increase from 54.3% to 67.9% of the total then Deutsche Bank is clearly expecting home prices to fall further and by a fair amount. The mortgage servicing companies being behind the curve is an issue that has been cited over and over again with respect to foreclosures. In the case with ARMS, 56% of the loan market in California between 2005-2007. These loans should be resetting early in significant numbers now due to the loan to values exceeding the specified contract limits of 110-125%. The last report I saw on this indicated that the average LTV was 126% during the 3rd quarter, now prices have increased slightly of late, but still this is an accident waiting to happen and both of these reports clearly indicate, we ain’t out of the woods just yet.
Hi and welcome to The Profit Motive, I’m your host Caleb Lawrence. Once upon a time in America the media acted as the watchdog of the corporations and the state. In the modern era it’s all about ratings and profits, opinion has been substituted for news and frequently is presented as fact. Much like my daily radio show on KPIG 107.5 FM in Santa Cruz California and KPYG FM 94.9 Cayucos/San Luis Obispo California. A thousand Blogs were able to spot the current problems and many began discussing it years before it reached crises proportions. While there were exceptions, and these exceptions are becoming more common, the mainstream media failed to get it and largely continue to do so.
