The Housing Crisis Gets Wider and Deeper

The New York Times business section has an article today about a new wave of foreclosures building in the lending category just above subprime:

Homeowners with good credit are falling behind on their payments in growing numbers, even as the problems with mortgages made to people with weak, or subprime, credit are showing their first, tentative signs of leveling off after two years of spiraling defaults.

The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A mortgages, quadrupled to 12 percent in April from a year earlier. Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time.

The mortgage troubles have been exacerbated by an economy that is still struggling. Reports last week showed another drop in home prices, slower-than-expected economic growth and a huge loss at General Motors. On Friday, the Labor Department reported that the unemployment rate in July climbed to a four-year high.

While it is difficult to draw precise parallels among various segments of the mortgage market, the arc of the crisis in subprime loans suggests that the problems in the broader market may not peak for another year or two, analysts said.

Defaults are likely to accelerate because many homeowners’ monthly payments are rising rapidly. The higher bills come as home prices continue to decline and banks tighten their lending standards, making it harder for people to refinance loans or sell their homes. Of particular concern are “alt-A” loans, many of which were made to people with good credit scores without proof of their income or assets.

“Subprime was the tip of the iceberg,” said Thomas H. Atteberry, president of First Pacific Advisors, a investment firm in Los Angeles that trades mortgage securities. “Prime will be far bigger in its impact.”

I can see the crisis in my own area, northern New Jersey. The signs are all over the place, literally. Of course, people sold homes before this recession began, and I did see For Sale Signs now and then in front of houses, but not every single day and almost everywhere I went. In my town and the towns nearby, I often drive down blocks where three or four houses are for sale, in one single block. It’s not unusual at all anymore.

 

4 Responses to “The Housing Crisis Gets Wider and Deeper”

  1. Chief says:

    It is the same with houses here in western Ohio. Also, a huge increase in the number of Sheriff’s sales listed in the local newspaper, mostly court ordered real estate.

    Also, I see a lot more cars/pickups/SUVs in yards or along the curb with “For Sale” signs in the front or side windows.

  2. nuckels says:

    I see this happening all over California. We are working on bring stories to the public, any storis of interst please submit to us

  3. like the song
    it has only just begun

  4. Julia Adkins says:

    My husband was recently downsized. He beats the streets everyday looking for work, but NO ONE is hiring in his industry. We have put our home that we have faithfully paid for, the last eleven years on the market, as we are unable to make the mortgage on unemployment. Unfortunately, the average time on the market is 8 months. I don’t have 8 months. Two foreclosures in the area are selling for 12k less than what we paid for the home 11 years ago and they can now be used in appraisals. Does everyone understand what the foreclosure crisis is doing to their property values? There are 6,000 foreclosures everday. 600,000 since January 1st. The 400,000 people with adjustable rate mortgages might be helped if and only if there lender agrees to write down their mortgage. These mortgages do NOT help people who are unemployed. You can’t get a loan if you are unemployed. This foreclosure mess has only begun . They are expecting 12 million foreclosures in the nation in the next 4 years.

    American’s ned help. We need a change in Washington and MORE jobs. The economy is in shambles. Get ready America it could be a long ride.

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