Wednesday, June 13, 2007

The number of foreclosures in May was the largest on record...

You can file this away in the "I told you so" section.

Housing Foreclosures Jumped 90% in May from a Year Ago
By Reuters | 12 Jun 2007 | 04:11 PM ET

...U.S. home foreclosures in May jumped 90% from a year earlier, reflecting a poor spring housing market and foreshadowing even higher levels later in 2007, real estate data firm RealtyTrac said on Tuesday. The May foreclosures -- a sum of default notices, auction sale notices and bank repossessions -- totaled 176,137, up 19% from April, the firm said in its May 2007 U.S. Foreclosure Market Report...

My, my what a surprise. The article is a little sparse, though, on the reasons why. It makes a passing reference about hoping the subprime meltdown doesn't spread to other markets, but curiously doesn't actually show that most of the foreclosures were subprime. I'm sure this article and some commentary on it will appear on so maybe we can find out. But I have a feeling that the "subprime" foreclosures are not the majority.

So you can't really tell from this data whether or not the "subprime" meltdown is actually a "housing" meltdown, and I wonder if from now on all articles about ARMs and foreclosures will contain the words "subprime meltdown" in order to deflect attention away from the number of meltdowns that are not subprime.

Clearly, many, many thousands of regular credit-worthy people were steered into flaky ARMs in spite of being qualified for conventional mortgages, as numerous articles have shown. Some thousands of additional people, I'm sure, really thought they could beat the market and voluntarily took ARMs to get a very low monthly payment that they thought was going to be temporary due to their job or plans to refinance later. And some more thousands just didn't get the fact that the lower payments were going to go away at some point and the difference between their actual payment and their "real" payment was getting tacked back on to their mortgage every months. So there are thousands and thousands and thousands of non-subprime mortgages that are melting down, too.

The media's focus on "subprime" should tell you something. The industries that buy their advertising are very, very afraid that if people figure out that the housing meltdown is widespread, there will be bad economic consequences. So when you see someone finally admit that the entire mortgage and housing industry is in danger, probably that means it will already be dead. (Sort of like Andropov.)

Aside from the obvious "don't trust the media" message, there is one other thing you must realize. It's not just about not relying on others for info - that's a negative. You also have to embrace the positive - action, meaning if you have a mortgage that is not conventional in any way, if you are relying on the value of your house for equity or retirement or income, you need to dig deep and find the relevant figures for both your mortgage bank and your locality. For most people, this kind of stuff isn't going to be on headline news. You are going to have to investigate your bank, your broker, your real estate agent, and the housing sale values, housing value trendline, foreclosure rate, empty homes etc. for your own county/city/neighborhood. This is the only way to tell if your "investment" is in danger or not.

One thing you have to understand, class. The government is not here to help you and neither is any corporation. Don't trust them with your livlihood and future. Do your homework and make wise decisions as to what to do with your "investment," whether its value is now more or less than when you bought it. Even if you bought your house a long time ago and have a conventional mortgage - how many of the people around you don't? And what happens when your neighborhood starts to go downhill because of them? You need to know your home's "real" value and where that value is going. That is part of good financial housekeeping - good stewardship.

So get to it.

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