So, is what happened to this couple in Sacramento a harbinger for the (near-term) future? I hope not but I fear that it is. I really feel sorry for these folks and others like them who listened to all the "buy now before you are priced out forever; houses only go up in price" BS and who fell for the "teaser" loans.Some choice quotes:
It took less than eight months for Dustin Suposs' "American Dream" to become a nightmare.He and his girlfriend, both in their early 20s, got caught up in the better-buy-now mentality that fueled the Sacramento area's housing market last spring. They bought a $365,000, 1,550-square-foot home in Elk Grove with no money down. The result: A $2,300-a-month payment that was more than 2 1/2 times the rent they were paying.
By December the couple were drowning in bills and debt. Now they're two months behind on the mortgage.
Experts say the pair are part of a new trend - a growing wave of distressed borrowers just beginning to hit Sacramento and across California.
How much foreclosures will rise this year will depend on a host of hard-to-predict variables, including the extent to which global demand for oil sends energy prices rising. Higher inflation would mean higher short-term and long-term rates, which "would spell real trouble for the housing market," said Wells Fargo & Co. economist Scott Anderson.
Already, many working with distressed borrowers see ominous signs that suggest foreclosure activity is picking up fast.
"We're seeing the early indicators that it's only getting worse," said Pam Canada, executive director of the nonprofit Neighborworks Homeownership Center in Oak Park, which educates would-be homebuyers and helps existing owners stay out of foreclosure.
"We knew the rate of appreciation was unsustainable and would have to come down, and as it comes down into the single digits it might even go negative" for a few months, said John Karevoll, a longtime DataQuick analyst.
Experts have stressed for years that home prices couldn't possibly keep rising by 20 percent a year, but many borrowers didn't heed the warning.
"Everyone was anticipating getting in (a house) at any cost and then letting appreciation in the market handle it in the next year or two," said John Arvanitis, president of Sunrise Vista Mortgage Corp. in Citrus Heights.
"In theory, that's great if appreciation stays at certain levels, but it's not happening anymore."
Many in the real estate industry are worried scores of homebuyers will suffer payment shock over the next two years as their low introductory interest rates expire or their interest-only periods end.
Some won't be able to afford the higher payments and will have to refinance, if possible, or sell - or possibly lose their homes in foreclosures.
Some of today's distressed borrowers have exacerbated their predicament by blowing their credit score or by tapping what little equity they had with a cash-out refinance or a home equity loan.
1 comment:
Not to sound cold, but I have ZERO sympathy for these people. It comes down to one word- GREED. You have to be a complete idiot to not have heard of a "bubble" by now.
People are by nature:
1. Lazy
2. Greedy
Combine those two and you have the majority of people looking to make a "quick" buck. Sorry that the music hs stopped playing and now they are stuck with an overvalued property, but they knew this and figured they would sell it to the next "sucker."
For those of us that remember the early 90's when the real estate markets were soft and you could buy a house cheap, we learned the value of patience and that history does repeat itself.
The cracks in the foundation are just now starting to emerge. Wait six months until the I/O's and Teaser ARMS start to reset. I predict that that all of these people with visions of making millions will all run to the exit at the same time- in the spring- and then you will see the panic start to set in when their "expert" realtor that sold them the house(es) telling them that ,' real estate only goes up" now tells them they need to continue to drop the price inorder to sell. It is going to be just like the stock market in 2000.
People are lemmings and they tend to do the exact opposite of what they should do,buy low and sell high. What they forgot was that a HOME is not supposed to be an INVESTMENT. A hard lesson to learn.
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