Beware The Second Wave
You know, I keep hearing about green shoots, and how the banks feel comfortable lending to one another again, and how the crisis has been averted. And then I read something like this, and despair:
Home values in the United States extended their fall in the first quarter, with more than one in five homeowners now owing more on their mortgages than their homes are worth, real estate website Zillow.com said on Wednesday.
U.S. home values posted a year-over-year decline of 14.2 percent to a Zillow Home Value Index of $182,378, resulting in a total 21.8 percent drop since the market peaked in 2006, according to Zillow's first-quarter Real Estate Market Reports, which encompass 161 metropolitan areas and cover the value changes in all homes, not just homes that have recently sold.
U.S. homes lost $704 billion in value during the first quarter and have depreciated $3.8 trillion in the past 12 months, according to analysis of the reports.
Declining home values left 21.9 percent of all American homeowners with negative equity by the end of the first quarter, Zillow said.
Banks are finally starting to tighten their mortgage standards, which looks good going forward. But we're talking about millions of homeowners underwater, many of whom could easily decide that constantly playing catch-up is no longer worth it. Keep in mind that many of these homeowners will experience recasts to their mortgage rates in the coming year, further straining their ability to make payments.
I just don't see how anyone can claim that the crisis has been lifted when this many people face foreclosure in the next year. The first wave brought the economy to its knees, and the second could be even bigger.
...we all understand that bad loans caused this crisis in the first place, right? Well, a lot of bad loans are still out there.
...Man, this looks like a big problem.
The number of U.S. homes valued at more than $729,750, the jumbo-loan limit in the most affluent areas, entering the foreclosure process jumped 127 percent during the first 10 weeks of this year from the same period of 2008, data compiled by RealtyTrac Inc. of Irvine, Calif., show. The rate rose 72 percent for homes valued at less than $417,000 and 78 percent for all homes, RealtyTrac said.