Are Housing Fundamentals Still Deteriorating?
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Mixed signals? Possibly. But in reality, these two seemingly disparate data points suggest that even as foreclosure moratoria continue to keep bank-owned properties off the market -- which is artificially limiting supply and creating the illusion of a tight housing market (the supply of existing homes is back to historical norms) -- behind the scenes, more and more borrowers are falling behind, and staying that way.
The number of mortgages in the "90+ delinquency but not yet foreclosed" bucket is still growing and the rate of change is yet to slow. The looming backlog of foreclosures not yet completed is growing much faster than banks can (or are allowed to) push them through the system. Lender Processing Services (LPS), a spinoff of Fidelity National Information Services Inc. (FIS) estimates that 710,000 mortgages are more than six months delinquent but not yet in foreclosure. A year ago, that number was "just" 203,000.
So what does all this mean?
While another leg down in housing is certainly in the cards, another cliff-dive isn't the likely scenario. Rather, a continued slow bleed, with increasing localization as certain markets recover while others languish. Second home and jumbo markets are still under pressure, even as investors feast on low-priced homes in some of the country's seedier neighborhoods. But as long as the US government dominates the secondary market for mortgages (FHA/Fannie Mae (FNM)/Freddie Mac (FRE)/VA, etc), mortgages will be available to qualified (and unqualified, in the case of the FHA) buyers.
Betting on another all-out collapse in residential housing prices is akin to betting on the bankruptcy of the US government. Could it happen? Sure, but that certainly isn't the base case.A much more interesting (and profitable) bet is to find areas that have fundamental (ie, demographic) drivers for demand, and looking for affordable submarkets where demand is strong and not driven by the FHA. Are there a ton of these neighborhoods around? Nope, but they're out there if you know how and where to look.
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*sigh* I'm not betting on an all out collapse of housing prices, either. Every large and small player has made it clear that lowering house prices (the real, final solution to the mess) must be avoided at all costs. We've given up where we live and are actively scouting out areas where overall housing costs were lower to begin with.
smile, this made me remember a slightly tangential discussion, I found interesting, perhaps you may as well.
On a recent vacation, we stopped in Costa Rica. Our tour guide talked about Termites at length. "Termites live in nests, while bees live in hives", she said pointing out that the termite nests had tunnels along the trees, and that was a visual difference . She noted that, "termites only eat dead wood. Thus actually helping the rain forest trees to thrive, eating away all the dead branches, clearing away the dead wood for the ever present race higher for sunlight."
More on topic: she then explained because the termites were so ubiquitous to the region, they stopped using wood in construction. Metal roofs, metal studs, concrete walls etc.
I found it slightly ironic, that where they had so much wood, and trees, they didn't use any.
Many empty boxes around here too, one around the block. This empty box is not even on the market. Down here, that is very bad for the home, mold, termites, rot, vermin and "you name it" chip away without rest.
Traveling south and seeing what people took for granted in terms of insect population was quite enlightening. If I lived in a tropical or sub-tropical region, I too, would be build my home out of something not wood. *grin*
