Yeah...and I think somebody got word of it yesterday. Hence the 300 point runup. I expect it to go back down though.
because the general population lives over extended financially. car notes, mortgages at 40% of income, rising property taxes, credit cards, student loans, etc.
This is a good thread. I propose to make it a general discussion about the stock market and make it sticky.
http://www.chron.com/disp/story.mpl/front/5071946.html U.S. foreclosures rose sharply in July Associated Press LOS ANGELES — The number of foreclosure filings reported in the U.S. last month jumped 93 percent from July of 2006 and rose 9 percent from June, the latest sign that homeowners are having trouble making payments and finding buyers during the national housing downturn. There were 179,599 foreclosure filings reported during July, up from 92,845 during the same period a year-ago, Irvine-based RealtyTrac said today. There were 164,644 foreclosure filings reported in June. The national foreclosure rate in July was one filing for every 693 households, the firm said. "While 43 states experienced year-over-year increases in foreclosure activity, just five states — California, Florida, Michigan, Ohio and Georgia — accounted for more than half of the nation's total foreclosure filings," RealtyTrac Chief Executive James J. Saccacio said. The filings include default notices, auction sale notices and bank repossessions. Some properties included in the survey might have received more than one notice, if the owners have multiple mortgages. The agency did break out individual properties as part of its report for the first six months of this year, when a total of 573,397 properties reported some sort of foreclosure activity. That represents a 58 percent jump from the 363,672 properties in the first six months of 2006 and a 32 percent increase from the 433,504 in the last six months of 2006, the firm said. In the July report, Nevada, Georgia and Michigan accounted for the highest foreclosure rates nationwide. Nevada posted the highest foreclosure rate: one filing for every 199 households, or more than three times the national average. It reported 5,116 filings during the month, an increase of 8 percent from June. Georgia's foreclosure rate was more than twice the national average, with one filing for every 299 households. The state reported 12,602 foreclosure filings, up 75 percent from June. Michigan reported 13,979 filings in July, a 39 percent spike from June. California, Florida and Ohio were among the states with the highest number of foreclosure filings in July, RealtyTrac said. California cities continued to dominate top metropolitan foreclosure rates. The state reported 39,013 foreclosure filings last month, the most by any single state. However, the number of filings rose less than 1 percent from June. The state's foreclosure rate was one filing for every 333 households, RealtyTrac said. Florida's foreclosure filings dropped 9 percent between June and July to 19,179. The July figure, however, represents a 78 percent jump from the year-ago period. In recent months, the mortgage industry has been battered by rising defaults and foreclosures, primarily driven by borrowers with subprime loans and adjustable rate mortgages. Lagging home sales and flat or decreasing home prices have made it more difficult for homeowners who fall behind on payments to sell their homes and clear the debt, spurring the rise in foreclosure activity.
Ron Paul's Take. I couldn't agree more. High Risk Credit August 20, 2007 As markets went on a rollercoaster ride last week, our economy is coming close to a day of reckoning for loose credit policies being followed by the Federal Reserve Bank. Simply, foreign banks we have been relying on to buy our debt are waking up to the reality of much higher default rates than predicted, and many mortgage backed securities have been reduced to “junk” ratings. Wall Street fears the possibility of tightening credit and the tightening of America’s belts. Why, they say, “if Americans spend only what they can afford, think of the ripple effects throughout the economy!” This is the cry, as the call comes for the fed to cut rates and bail out companies in trouble. More inflation is, however, never the answer to inflation. The truth is that business involves risk, and businesses that miscalculate risk should be liquidated, so their assets can be reallocated to businesses that correctly judge risk and make profits. Instead, the Fed has injected $64 billion into the jittery markets, effectively amounting to a bailout that keeps these malinvestments afloat, but eventually they will become the undoing of our economy. In addition to the negative reactions in financial markets, many Americans have taken on too much personal debt owing to exotic mortgage products and artificially low interest rates. Unfortunately, these families are now in the position of losing their homes in unprecedented numbers as the teaser rates expire and the real bills are coming due. The real answers are, and always have been, found in the principles of the free market. Let the market set the interest rates. If we had been functioning under a true and transparent free market system, we would not be in the mess we are in today. Government, like the American household, needs to live within its means to get back on stable fiscal ground. We’ve been headed in the wrong direction since 1971. This week marks the 36th anniversary of Nixon’s decision to close the gold window, which convinced me to seek public office to call attention to the runaway money train that would come in the aftermath of that decision. The temptation to print and spend money with impunity, like the temptation to max out lines of credit, is too strong to for government to resist. While Nixon brokered exclusivity deals with OPEC to prop up demand for the tidal wave of green pieces of paper the Fed pumped into the markets, the world is tiring of marching to the beat of our drum in order to secure their energy needs. The house of cards Nixon built is now on the verge of collapsing on our heads, and on our children’s heads. As the dollar weakens, it becomes ever clearer that we need a return to sound, commodity-based money for a secure future. Money based on real value, not empty promises and secretive backroom machinations, is the way to get out of the current calamity without causing even bigger problems.
that was a good article but I think this should be quoted for emphasis. we always hear about how americans should save more but what would that to do the global economy? sometimes i think politicians in washington are very happy with our out of control spending practices.
I posted this on a thread in Hangout: Currently in San Diego County there are 11,122 homes in Pre-foreclosure status, 2,436 headed to auction, and 4,837 owned by the lending institution. http://www.realtytrac.com/freeSearc...ccnt=122140#111 If you look at their map, there seems to be a couple of houses on every block. Here are some more numbers: Clark County (Las Vegas): 11,602 Pre-foreclosures, 4,290 headed to auction, and 5,321 bank-owned. Phoenix: 45 Pre-foreclosure, 14,924 in auction, 5,525 bank owned. Dade County (Miami): 15,290... 5,335... 3,204 Atlanta: 12... 5,604... 4,655 Chicago: 30,311... 9,396... 12,501 Detroit: 4,887... 12,385... 15,771 LA: 25,246... 8,479... 8,926 That's a lot of people hurting financially. I remember the energy bust in the mid-80's and how that snowballed to where even people who could make the payments ended up defaulting because they were the only ones left in the neighborhood, they couldn't sell their house, and it was worth much less then they paid for it. They ended up just walking away.
Consumer Comfort Index Reports Dramatic Decrease Post-ABC Poll on Economic Conditions Shows Largest One-Week Drop Since 1985 By Jon Cohen and Jennifer Agiesta Washington Post Staff Writers Tuesday, August 21, 2007; 5:02 PM http://www.washingtonpost.com/wp-dyn/content/article/2007/08/21/AR2007082101409_pf.html Consumer comfort plummeted this week amid turbulence in the stock market and a seemingly infectious crisis in the home mortgage market. The Washington Post-ABC News consumer comfort index (CCI), a barometer of the public's assessment of current economic conditions, plunged nine points this week, the biggest ever one-week drop since the poll started in late 1985. The CCI now stands at -20 on its scale of --100 to +100, well off its high for the year, +2 in March, and near its post-Hurricane Katrina lows. After that storm devastated the Gulf Coast two years ago, consumer confidence quickly dropped by 11 points before recovering several months later. The current fall has been even more precipitous. A month ago, easing gasoline prices helped lift the index to -5, 15 points higher than it is this week. Although pump prices remain below the highs reached earlier this year, the stock market's recent ups and downs likely have rattled some nerves. In an April Gallup poll, about two-thirds of Americans said they have money invested in securities. The volatility's close link to the cooling housing market personalizes the crisis. The AP reported today that the national foreclosure rate has nearly doubled over the past year. The CCI among homeowners is now lower than it has been at any point since November 2005. The CCI combines Americans' ratings of the national economy, their personal finances and the general buying climate. In another rarity, all three of the index's components are down this week. Only 32 percent rate the nation's economy positively, down from 37 percent last week and 44 percent a month ago. More, 53 percent, say their personal finances are in "excellent" or "good" shape, but that is the fewest to say so since October 2004. Ratings of the buying climate are off this week, but remain better than they were during the latest gas price spike. (This measure runs the most closely to gasoline prices.) Overall, 35 percent say it is an excellent or good time to buy the things they need; 39 percent said so last week. The CCI's largest previous one-week decline was seven points. . The index has fallen that much three times, the last time in February 2004. The Post-ABC index is a rolling average based on telephone interviews with 1,000 randomly selected adults nationwide conducted over a four-week period that ended Aug. 19. The results have a margin of sampling error of plus or minus three percentage points.
Here's a brief summary (for those of you who are wondering what the hell is being said here) and some of my opinion. What happened? Years ago, Americans got wrapped up in spending a lot of money (more than usual). Mortgage companies decided to appeal to our spending by offering us mortgages that are easy to get into (with low initial interest rates, and little or no credit check needed). These are called subprime loans. Those mortgage companies knew that there was a strong probability that a LOT of people would default on their mortgage (not pay off the money they borrowed). So, they sold the mortgages to European banks. The European banks weren't expecting there to be so many defaults, and they're now pissed at us for selling them a hot potato. And so, now, lots of people are losing their houses because they foolishly took on mortgages that they couldn't afford. European banks are not very excited about doing business with us right now. And the housing market is really shaky because of declines in home sales and in new home building. My prediction I hate to say this, folks, but I think we've just seen the tip of the iceberg. I think the bubble is gonna burst a LOT worse than it is. Americans are saving money in negative numbers. That means, we're NOT saving money. In fact, we're actually spending more many than we make. People are in debt. BADLY in debt. People like Luckyazn (link) who is in debt $50k, but earns less than $50k a year. There are worse debt stories out there, there are a LOT of them, and there are going to be a LOT more very soon. Here's what I think is gonna happen. People who are in such bad debt are going to default. They'll lose their houses, and they'll sell most of their fancy possessions (or they'll be repossessed). They'll have to go live in an apartment. This is gonna happen on a mass scale (have you noticed a LOT of apartment complexes being built recently? I'm not the only one who sees this storm coming). And all those people will not be able to afford a house. At all. No matter how low the mortgage interest rate is. No matter how low the home price is. The real estate industry could lower interest rates down to 2% and drop home prices down to $80,000 and the houses still won't sell. They won't sell because the people that defaulted and are living in apartments can still not afford that house. In fact, they'll still be in debt, they'll have almost no cash, and their credit will be destroyed. That's what I think is gonna happen. In fact, it's already started. It's happening right now.
Oddly enough, every single one of those places (except Detroit) were in the high flyers list just 2-3 years ago. People were buying houses with 0% down and an ARM just to sell them again for $100,000 profit in 6 months. Get rid of the Federal Reserve, make banks eat their own mistakes, and everything would straighten itself out in two years.
This is true, except there would be a ton of collateral damage to people who weren't in any way, shape, or form involved in any of the fiscally irresponsible activities.
If millions of Americans losing their homes, stock market nose diving, and economy tanking in general is ok by you. Do you really want a repeat of 1929?
By the way, we just got a letter from one of our cards that if we are late on a payment, our interest jumps to 33%. A big thank you to all the supporters of the recent bankruptcy legislation who allowed this to happen. Way to set it up so that a bad problem becomes much worse. By the way, I think I could run for President and get 30% of the vote on a platform solely advocating a reduction in credit card and banking fees and a "profitable" cap, say, 8%, on the amount of interest cards can charge. It'd mean more money in people's pockets then any tax cut.
this is the market's fault. it is not the fed's fault. they are trying to ease the unwinding of the market's irresponsibility. we will see how well they do.
Market-based interest rates would be higher than we have. The Fed was loaning money to the banks at 0.75% for a while, to "spur the economy" (read: increase borrowing). When the Fed artificially depresses rates to spur growth, people borrow more money than they could afford with a market-based interest rate, and then lose their homes when rates go up, part of the blame falls on the Fed. Not that the Fed did anything malicious, it's just that it's existence is an unsettling force. It's a sad state when people in this country trust the banking cartel more than they do the free market, just because it occasionally lets them borrow at below market rates.
i am feeling lazy so i won't go in major depth but this is the market's fault for being so stupidly leveraged in thinly traded CDOs that no one actually knew the value of because of creative financial engineering. there was a housing bubble that everyone knew existed but they still tied these CDOs to inflated bubble prices. further, "these guys" in the "market" still are not linking their "investments" to actual prices that are being traded. they are still marking to model and not to the real market. if this stupid mark to model stuff wasn't out there then the problem would not have grown to the size it has. trust me...i am not saying that is the majority of the problem but it's certainly a major factor that is not being discussed. i think a good chunk of the deleveraging has been done, but if we end this stupid mark to model then it will finally chop off the head on the rest. i will agree that it is the fed's fault for endorsing these creative subprime loans and not espousing their risks. further, no one in the fed really cared at the top of the bubble when most of these creative loans were being given. but that's how bubbles usually are...
also...people aren't losing their homes because of rates going up. they are losing them because they bought at inflated prices and set themselves up to be abused by a rotten lending industry. yes the rates are reseting but this not because overall rates are increasing. it is only a function of their silly loans.
