"Today, seven years after the real estate bubble burst, triggering the worst economic crisis since the Great Depression and costing millions of responsible Americans their jobs and their homes, our housing market is healing. Sales are up. Foreclosures are down. Construction is expanding. And thanks to rising home prices over the past year, 1.7 million more families have been able to come up for air because they're no longer underwater on their mortgages." -- President Barack Obama, May 11, 2013
What a load of malarkey. The truth is housing is in a shambles. Starts are down, inventory is tight, demand is weak, mortgage originations are flat, household formation has fallen off a cliff, (The homeownership rate is now at levels last seen in the mid-1990s), and the entire industry is precariously propped atop artificially-low interest rates and the Fed's bogus $40 billion per month QE giveaway.
Does that sound like a thriving market to you?
Author Jann Swanson gives a great rundown of the rot behind the cheery headlines in a recent piece on Mortgage News Daily. Here's a bit of what she had to say:
"Rising home prices usually coincide with rising demand as more households form or people's preferences swing toward homeownership. The Bank says neither trend appears to be present today. Household formation rose 980,000 in 2012, compared to the long term annual average of 1.28 million between 1965 and 2001. Moreover, the overwhelming majority of new households are choosing to rent rather than own their home. The homeownership rate fell 0.4 percentage points during the first quarter to 65.0 percent and is now at levels last seen in the mid-1990s...
"It is hard to imagine a sustainable housing recovery taking place with fewer homeowners." ("Housing Headlines Mask Unsettling Trends," Mortgage News Daily -- Be sure to check out the charts)- Advertisement -
Indeed, but try to get that message across over the hoopla about "rising home prices." Rising prices are a big nothingburger. They don't mean growing demand or a strong recovery. They just mean that more yield-crazed speculators are scavenging the market looking for their next big killing. That's what's driving prices, right? Absent the flood of Wall Street moolah, housing would still be in the doldrums.
Last week, Reuters reported that the mortgage delinquency rate had risen.
Huh? So, why are more people falling behind on their payments when prices are rising, the economy is getting stronger, and the banks are only lending to creditworthy customers?
The reason the delinquency rate is going up is because the banks are starting to whittle away at their mammoth stockpile of bad loans. You see, the banks have been playing hide-n-seek for the last four years, cooking the books so no one could see the stinking dung heap of non-performing loans and other toxic dreck they have tucked away from public view. It's one big shell game. That's what the phony mortgage modification programs were all about; helping the big lenders extend and pretend while they recapitalized; keeping struggling homeowners in their homes until the vampire banks got healthy enough to toss them out on their ear.
Think I'm kidding? Get a load of this from DS News:
"As of February 2013, mortgages originated before 2009 accounted for 86 percent of all delinquent mortgages. This suggests the issue with the high mortgage delinquency rate is not new loans that are falling behind on payments." ("Report: Long Cure, Foreclosure Timelines Cause High Delinquency Rate," DS News)
"86%" of all delinquent mortgages were issued before 2009! Can you see what a scam this is? These are the old stinker loans from yesteryear; the subprimes, Alt As and ARMs vintage 2006-2008. The banks are just getting to them now because, they knew -- that if they foreclosed too quickly -- prices would plunge and they'd be submerged in red ink. Now that prices are rising -- they're going to step up the process and throw more people out of their homes. Only they're going to take their sweet time doing it so they can preserve the illusion of a housing rebound and lure more victims into the snake pit.
And here's something else that might interest you from the same article:
"The credit bureau also reported newer mortgages are performing well and avoiding delinquency, with only 2.5 percent of mortgages originated in 2010 rolling into delinquency status within their first three years."
Well, what do you know; so the banks actually know how to issue loans that don't blow up after all. Who would have guessed? 2.5% is right-smack in the normal range of expected delinquencies, which proves -- without a doubt -- that the banks were scamming the system and knew that their subprime mortgage laundering, credit swindle was going to explode and cost trillions. Ha!