by ilene - April 11th, 2010 11:58 am
Courtesy of Mish
Citing a DePaul University study, the Chicago Tribune reports More than 42 percent of small rental buildings in Cook County are ‘underwater’
Owners of 96,000 two- to six-unit rental buildings in Cook County are upside-down on $12.6 billion of mortgage debt, potentially putting 42 percent of small rental buildings in the county at risk of default, new data show.
A study by DePaul University’s Institute for Housing Studies, released Wednesday, also found that $3 billion in multifamily building mortgages already are in foreclosure, affecting more than 32,000 rental units in Cook County, or 6.8 percent of multifamily mortgages. That compares with about 38,000 single-family homes in foreclosure in Cook County.
Researchers analyzed 25,822 sales of existing small rental buildings and 591 sales of buildings with seven or more units in Cook County.
Multi-family foreclosure rate spikes in Cook County
Here are some additional facts in a Chicago Sun Times article Multi-family foreclosure rate spikes in Cook County
The foreclosure rate on multi-family rental properties in Cook County has spiked, and falling property values have put 30 percent, or more than $13 billion in Cook County’s multi-family mortgages at default risk, according to a study released today by DePaul University’s Institute for Housing Studies.
The report found that there are more than 32,000 rental units in Cook County impacted by foreclosures. The percent of loans in foreclosure on small two- to six-unit properties jumped to 8.75 percent in the fourth quarter of 2009 from 1.67 percent five years ago. On large seven-plus unit rental properties foreclosure rates jumped from 0.3 percent in 2004 to 3 percent in the fourth quarter of 2009.
For one in eight rental apartment units, revenues are falling below operating costs for owners. Owners of about 74,000 rental units in Chicago or 13 percent of the market, are currently spending more to operate buildings than they are collecting in revenues, placing them at significant risk of decreased or discontinued maintenance.
“The multi-family foreclosure crisis has not received as much attention as the crisis in the single-family housing market, but the trends outlined in this report demonstrate that it should,” study author James Shilling, chair of Real Estate Studies, said in a statement.
He added the problem
…
Tags: Chicago, Housing, Housing Market, multifamily housing, Rental buildings, single family homes, underwater
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by ilene - November 25th, 2009 6:42 pm
Courtesy of The Shocked Investor
The Wall St. Journal reports that 23% of U.S. homeowners owe more on their mortgages than the properties are worth. Approximately 10.7 million households has negative equity in their homes, based on data from First American CoreLogic.
The following map shows the percentage in each state (please click to enlarge):
The firm says that these properties are more likely to go into foreclosure and "get dumped into an already saturated market".
Housing prices have dropped so much that 5.3M households are tied to mortgages that are at least 20% higher than what their home is worth and over 520,000 of these borrowers have received a notice of default.
Tags: Mortgages, notice of default, underwater
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by ilene - August 6th, 2009 1:00 pm
Courtesy of Jesse’s Café Américain
Do banks ever stop swimming?
Ben will need to print quite a bit more manure to throw on those green shoots, tout suite.
Its almost feeding time.
Bloomberg
‘Underwater’ Mortgages to Hit 48%, Deutsche Bank Says
By Jody Shenn
August 5, 2009 15:32 EDT
Aug. 5 (Bloomberg) — Almost half of U.S. homeowners with a mortgage are likely to owe more than their properties are worth before the housing recession ends, Deutsche Bank AG said.
The percentage of “underwater” loans may rise to 48 percent, or 25 million homes, as prices drop through the first quarter of 2011, Karen Weaver and Ying Shen, analysts in New York at Deutsche Bank, wrote in a report today.
As of March 31, the share of homes mortgaged for more than their value was 26 percent, or about 14 million properties, according to Deutsche Bank. Further deterioration will depress consumer spending and boost defaults by borrowers who face unemployment, divorce, disability or other financial challenges, the securitization analysts said.
“Borrowers may also ‘ruthlessly’ or strategically default even without such life events,” they wrote…
Home prices will decline another 14 percent on average, the analysts wrote.
Full article here >>.
Tags: Deutsche Bank, Mortgages, underwater
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by ilene - August 6th, 2009 10:41 am
By Barbara Kiviat, courtesy of TIME
amanaimages / Corbis, courtesy of TIME
If you’re not already underwater on your mortgage, there’s a decent chance you will be. According to a new report from Deutsche Bank, up to 25 million American homeowners could eventually owe more than their house is worth. That would account for 48% of all mortgage holders.
This isn’t the first time we’ve heard exceptional numbers on upside-down borrowers. First American CoreLogic figures there were already 11 million homeowners in that position at the end of last year, and Moody’s Economy.com estimates we had reached 15 million by the end of March. The Deutsche Bank projection, the direst so far, assumes house prices nationwide will drop another 14%. (See how Americans are spending now.)
The problem is already a massive one. When the value of a house is less than its mortgage, a homeowner can’t sell and pay off his debt. If a house becomes unaffordable—because of job loss, say, or an adjusting mortgage interest rate—a homeowner is trapped. Academic research shows that underwater borrowers are more likely to default on their mortgage than those with positive equity. (See a chart showing the highest percentage of underwater borrowers.)
The Deustche Bank report adds another wrinkle. So far, the highest rates of underwater borrowers have been found among those people with subprime, Alt-A and Option-ARM loans. These loans, often sold to people with low credit scores or those stretching to be able to afford a house, were largely peddled at the height of the boom, and therefore often correspond to home prices that had nowhere to go but down. However, according to Deutsche Bank’s projections, a second-wave of upside borrowers is about to hit, and this time prime borrowers will account for the bulk. As of the end of March, the bank estimated that 16% of prime borrowers with conforming loans were underwater. By the end of March 2011, some 41% are projected to be. And about half of those are expected to owe at least 25% more than their house’s value.
The "good" news is that the worst of the problem is fairly concentrated geographically. Places where house prices have fallen the most have been hit the worst. That includes areas that saw the wildest speculation and overbuilding—like California,…
Tags: Mortgages, prime borrowers, second wave, underwater
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by ilene - July 18th, 2009 5:45 pm
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Courtesy of Mish
Here is an email from JMI that I would like to share. Jeff writes:
Green Shoots or Kudzu?
The most recent report on home foreclosures was very ugly. The second quarter foreclosure rate was at 889,000. Annualized, that is about 3.5 Million homes foreclosed upon in 2009. The national stats for homeowners in the US in 2007 was about 75 million homes owner occupied. The National Association of Realtors is projecting 5.5 million homes to be sold in 2009.
Additionally, this report highlights that 8.3 million households are now underwater and at risk of "walk aways". 2.2 million more will be underwater if we go down in prices another 5%. Option ARMS are just beginning to be reset and those numbers will peak in August of 2011 and will most likely drive all of these numbers higher with higher mortgage payments. These are all published numbers from non government agencies.
Here is a summary
- US Households: 75 Million
- 2009 Projected Foreclosures: 3.5 Million (1 of every 21 households)
- 2009 Projected Home Sales 5.5 Million
- Inventory of Foreclosures 2 1/2 years (assuming 25% of home sales are foreclosures)
- Number of Homes Underwater 8.8. million (1 of every 8.5 households)
- Number of Households underwater if prices decline another 5%: 11 Million (1 of every 6.8 households)
The American dream of owning a home has quickly turned into a nightmare of monumental proportions going well beyond almost anyone’s wildest and darkest thoughts.
As unemployment rises above 10% and more Americans are faced with their homes being underwater, the bottom in this market is years away and will be a drag on our economy like never seen before. Home ownership will never rebound to the 75 million again as millions look for cheaper rent and an opportunity to repair their balance sheets.
I really believe these are greenshoots; the Kudzu variety.
Jeff
Thanks Jeff.
For more foreclosures please see Foreclosure Filings Hit Record 1.5 Million; One in Eight Americans Delinquent; Obama’s Mortgage Rescues Create ‘Confusion’.
Jeff is correct. Foreclosures and defaults of all kinds and consumer balance sheet repair in general will be a drag on the economy for years, possibly even a decade. I Expect Seven Years of Subpar Growth and High Unemployment at a minimum.
Mike "Mish" Shedlock
Tags: Foreclosures, Housing, option ARMS, underwater
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