It depends on where you live. In Nevada, the odds of losing a home to foreclosure could soon be about the same as getting the flu if predictions in a new Pew Charitable Trusts report come true.
One in 11 Nevadans will be in foreclosure within the next two years as a result of subprime loans made in 2005 and 2006, Pew Charitable Trusts predicts in San Diego Union Tribune.)
Nationally, the group predicts that one in 33 current homeowners will be in foreclosure within two years. Go to page 10 of the report to see what the foreclosure odds are in your state.
The Minneapolis Star Tribune tells the amazing story of a painting contractor, living with his wife and three children in a trailer park, who three years ago managed to buy four homes worth $1.2 million. He was hoping to flip the homes and get rich off the appreciation. Instead, the real estate market collapsed and his investment properties sank into foreclosure.
The story is part of a series that started April 20 about the unraveling of the investor-heavy Wright County real estate market.
The red hot Canadian housing market has shown tremendous resilience even as home prices on its southern border tumble. But a new Canadian Real Estate Association report indicates that the market is losing steam.
The price of an average Canadian home climbed 5.5% in the first quarter of 2008 compared to a year earlier -- the smallest annual jump since the fourth quarter of 2001. And first-quarter sales dropped 13% from a year ago.
The U.S. median existing home price, by contrast, fell 8.2% in February from a year earlier to $195,900.
"Canada’s six-year housing market boom is officially over," Doug Porter of BMO Capital Markets told CBC.
The March report on housing construction was even worse than economists expected. Starts on construction of homes fell twice as much as expected. They dropped 11.9% in March from February, leaving them at their lowest point since 1991. A big part of the decline was starts on multifamily dwellings, which tend to fluctuate a lot. Analysts say the number to pay attention to is the decline in starts on single-family homes. That was off 5.7% from February, making it the 12th monthly decline in a row. Believe it or not, single-family starts in March were 63% below their record level of January 2006, when they were going at an annualized rate of 1.84 million.
David Rosenberg, North American economist for Merrill Lynch, says this is "turning out so far to be among [the] worst housing cycles in recorded history."
Amid such gloom, it might seem strange that a new Reuters/Zogby poll has found that a majority of Americans think this is a good time to buy a house. But the two things aren't necessarily contradictory. The steep drop in housing construction is reducing the oversupply of unsold homes, which will eventually lead to a firming of prices. I'm not saying that the bottom for housing prices is here or near, but the pain suffered by carpenters today is going to translate into gain for homeowners sometime in the future.
I wrote a story for the magazine last week about the surprisingly low prices I saw at an auction of foreclosed property in Los Angeles. One home that had sold two years ago for $887,000, went for $285,000 for example.
I had a nice chat before the article was published with Celeste Hammond, a professor of real estate law at John Marshall Law School in Chicago. She reviewed a sales contract from another auction company, although I believe the terms are much the same. Hammond said it was an incredibly one-sided contract, written entirely in favor of the sellers.
Among other things, there were no contingencies for inspections or financing. If you discovered the home was structurally unsound after you were the high bidder and backed out, you could lose your deposit. Same was true if you brought your own financing to the deal and it fell through.
Hammond said these auctions were really for professional investors only. Given the deals that were being done—properties were trading for about 60% of their most recent asking price—I’d hate to think no one else should bid. But buyers definitely need to do their homework.
Scott Stern runs St. Louis-based Lenders One, which provides services to 110 mortgage banking firms. On Thursday he testified before the Senate Banking Committee on what he calls Scott Stern's first law of economics. That is: To stem the fall in housing prices, the country must address the foreclosure problem. Keep borrowers in the homes, less housing inventory comes on the market and prices stay up.
Like many in the mortgage biz he's frustrated that the Fed's sharp cuts in rates haven't brought folks back buying homes. "There is a crisis of confidence," he says. Stern supports Senator Chris Dodd's proposal to allow mortgage loan services to shave 10% off the loan amounts of troubled borrowers. Mortgage investors, not the government would take the hit. That way borrowers could refinance into safer, goverment-insured fixed rate loans. "They're trying to put incentives in place to encourage investors to participate," Stern says. "There’s a lot of good thinking on this."
The mountain of get-rich real estate books on my desk reached an unwieldy pinnacle back at end of 2005 -- so much so that I had to dodge the occasional avalanche.
I was the real estate reporter for The (Bergen) Record newspaper in New Jersey and had recently finished a series of stories called "Boom or Bubble: How Long Can The Boom Last."
Of course, I didn't buy these books and could steal only enough time to skim a few of them. Publishers sent me complimentary copies, hoping for a mention or the possibility that I'd interview the author. The books rarely made it into my stories but they kept rolling in.
A few layers from the top, there were three copies of the pre-bust classic from National Association of Realtors' Chief Economist David Lereah: "Are You Missing the Real Estate Boom -- The Boom Will Not Bust and Why Property Values Will Continue to Climb Through the End of the Decade - And How to Profit From Them." A family is pictured on the cover, gazing up in amazement at a levitating house.
Lereah, who was later dubbed by critics as the "Why the Real Estate Boom Will Not Bust and How You Can Profit From it."
The bust began a few months later. The Dallas Morning News' Steve Brown has an interesting column today on the slump in get-rich real estate books.