Insane Housing Foreclosures Chart, Redux
From this space, August 7, 2005 (‘Sell! Sell! Sell!’):
Oh, man, watch out, the sky is falling.
And then, of course, starting in 2006 and going completely nuts in 2007, foreclosures really did hit the fan.
Update! For your viewing pleasure, this chart from yesterday’s Los Angeles Times:
And, as before, note:
This isn’t another phoney-baloney non-zero-based graph, where the Y axis goes from, say, 1000 to 1005. Nope, this graph’s Y axis starts at zero, and it’s a linear scale, so if it looks 20 times bigger, it is 20 times bigger.
Check out the big foreclosure hump in the center of the graph, about 10 years ago, when housing prices in Southern California had tanked to the point where some houses had lost half their value.
Now look at what the graph has done in the last couple of quarters. That thing’s still not even thinking about slowing down.
We probably have at least another year of crazy, unconventional predatory loans that have yet to reset from their teaser rates. And then a much longer period, years more, where buyers sit on their hands, waiting for prices to finish falling, and sellers stubbornly refuse to sell their homes at the market rate (or are unable to, because their mortgages are under water).
The one possible bright spot on the home mortgage front: our crazy deficit spending over the last 6 years has eroded (and continues to erode) the dollar, which has lost half its value vs. the euro since 2001. This inflation makes U.S. goods and services relatively cheaper overseas, and lowers the real level of indebtedness on existing loans.
Unless, of course, you have an adjustable-rate loan.
Read the full story at The Los Angeles Times:
“California home foreclosures again set a record”
October 27, 2007
If you buy a home for 10% down, and its value falls by 10%, you’ve been wiped out.
Tom Chappell wrote:
Princeton economist and New York Times columnist Paul Krugman weighs in with additional helpful graphs (thanks to John Blackburn for pointer).
In particular, the first graph shows that the real cost of U. S. housing (factoring out inflation), after staying more or less level from 1950 to 1995 or so, then suddenly doubled in less than a decade, which is a hell of an pricing anamoly, and the final graph shows that subprime resets are about to get much worse, through the end of 2008, and even then will continue at about the current horrible level through the end of 2011.
Posted 28 Oct 2007 at 11:42 pm ¶
Bill Standley wrote:
About the slight narrowing of the trade deficit and the bevy of benefits it brings…
IMO, this by no means implies any large-scale return of domestic manufacturing. The business climate for manufacturing in this country remains burdened with high social welfare costs (like Medicare), and costly regulatory burdens (OSHA, EPA, etc.)… none of which burden companies in Asia. Even if a lower dollar does manage to attract a few factories back to the U.S., the specialized support expertise that accompanies them have all but disappeared. It would require many years to redevelop this expertise again — another cost that most companies probably would not want to bear.
While capital is very portable, government and infrastructure is not. And while the regulatory and tax environment could be eliminated overnight by government fiat, the beneficiaries of such largess aren’t going anywhere. And they vote.
So I agree that this is bad, Tom, and I think it’s likely going to be much worse than most people believe. We, as a nation, have been eating our seed corn for 30 years. The silo’s practically empty. What will we “eat” next year? And the year after that?
Posted 29 Oct 2007 at 11:55 am ¶
Tom Chappell wrote:
I didn’t mean that massive currency devaluation was great news; rather that this was the only conceivable potential bright spot on the horizon for borrowers. (And likely brighter for them, on balance, than for net savers whose nestegg has been cut in half).
And hey, at least the U.S. demand for Computer Scientists has picked up, lately, and somehow, that’s what I tend to care about the most. I’m kind of provincial that way.
Posted 29 Oct 2007 at 11:49 pm ¶
Bill Standley wrote:
Yeah, the older I get, the more provincial I get! I’d like to see my kids enter a society having more employment opportunities than cooks, bartenders and motel maids.
Posted 30 Oct 2007 at 10:20 am ¶
Alicia wrote:
I agree — it’s going to get much worse before it gets better; that graph’s going to go straight up for another 4 years or so, I would guess. Time to leave for the land of good food (Baja)?
Posted 11 Nov 2007 at 1:21 pm ¶