Housing's Front Lines
CNBC Real Estate Reporter
I'm out in Tampa today doing a story on loan modification companies.
I blogged about it last week — these are the new crop of middlemen promising to get you through the lender-red tape and save your home, for a fee of course.
Anyway, so in order to do the story, we went in search of a "Bank Owned" real estate for sale sign, which of course wasn't too hard to find in Tampa, which ranks about 16 in highest national foreclosure rates. The home is large and new and pretty, and right next door is another home which is on the market as well, although not a foreclosure.
This morning about a dozen real estate agents came by for an open house and raved about how beautifully appointed the home was. It was listed at $599,000. I asked if the Bank Owned home would go for much less, and they said it definitely would because it had been "stripped." In other words, the owners who were forced out took the appliances and fixtures along with them. Very common these days.
Later in the day, as we were preparing for one of our TV reports, a young woman and her daughter came out of the bank owned home with a Realtor. It turns out she and her husband are buying the home. They live just down the palm-lined street, but in a much smaller home that they bought almost a decade ago, so they may not even sell it now. She told me they are buying the home for $160,000 less than the appraised value. "That's great," I said, "since this one next door is on for 599." She looked shocked. She said it had been on for $700,000 just a week ago.
And there you have it. Foreclosed properties bringing down the values of the homes all around them.
Today the S&P Case Shiller home price index showed yet another month with record drops in home prices. This as the headlines are still blaring yesterday's news that home sales surprisingly bumped up in December. Yes, sales are up, but that's largely due to bargain hunters buying up foreclosed properties, and many of these bargain hunters are, dare I say it, investors, who are looking to flip the properties yet again.
I also got some new information today from Zelman & Associates, the shop of wunder-analyst Ivy Zelman, predicting a far worse 2009 in housing than previously, and not predicting recovery of any sort until well into 2010.
Why? Foreclosures. They expect the flood of foreclosures to increase, thanks to job losses and falling family incomes. With foreclosed properties adding to already surging inventories, prices could fall another 20 percent, they say.
It seems to be a crisis feeding on itself.
The more foreclosures, the more values fall, the more people are unable to refinance because they have no equity, the more people fall into foreclosures.
And what about the hope of a government bailout? If the action in Congress so far is any indication, things are moving far too slowly to help. Moody's predicts 5 million borrowers will default in the next two years with foreclosures peaking in the first quarter of next year. Even if the government does finally choose a bailout plan and even if it saves half those borrowers, that's still 2.5 million foreclosed properties hitting the market.
I know many of you think I'm the angel of housing doom, but we need to face some cold hard facts.
One month-to-month increase in sales, percentage-wise, from a huge drop the previous month, means absolutely nothing. I have been to the neighborhoods, I have spoken to more experts than you can imagine, and I am looking for the good news here, but I'm not finding it.
Housing is going to get worse before it gets better, and until someone in the Obama administration really and truly gets that fact, I don't care what city or town you live in or how far you are from the wreckage of California, Florida, Nevada and Arizona, you will feel it.
- Obama Meets With GOP But Stimulus 'Battle' Continues
Questions? Comments? RealtyCheck@cnbc.com