Misdeed
“If you break your neck, if you have nothing to eat, if your house is on fire, then you got a problem. Everything else is inconvenience.” – Robert Fulghum
Last Friday, the LA Times reported “the number of default notices sent to the state’s homeowners is up 15.6% in 2005’s last quarter from a year earlier.”
“The delinquency notices serve as an early indicator of possible foreclosures. Typically, about 5% of homeowners who receive such notices end up losing their homes. Lenders sent 14,999 default notices to California homeowners from October through December, according to DataQuick Information Systems.”
“The increase in delinquencies probably is a result of the decline in home appreciation in many markets over the last couple of years, DataQuick analyst John Karevoll said. While home prices were rising, homeowners were able to tap a growing pool of equity for loans or refinancing if they found themselves in financial straits.”
“But when prices don’t go up as fast, you don’t have that built-up equity like you did before,” Karevoll said. “People won’t have that buffer the way they did a year or two ago.”
“And financially distressed homeowners have largely been able to avoid foreclosures because rising real estate prices allow them to sell their properties instead. The state’s annual home appreciation rate peaked in the second quarter of 2004 at 22.8%. It has declined steadily since then. It was 14.5% in the fourth quarter of 2005.” DataQuick said.
Nell Henderson at the Washington Post reviewed Greenspan’s legacy and came away with this conclusion: As economy thrived under Greenspan, so did debt.
“Fed officials expected then that longer-term rates, such as mortgages, would rise as well, causing consumers to borrow less and save more. But it did’t work out that way. For several reasons -- low inflation, economic stability and foreign investors pouring their savings into U.S. stocks, bonds and other assets -- long-term interest rates fell for a year after the Fed started raising the benchmark rate and have stayed relatively low.”
“Mortgage rates also fell, prompting homeowners to refinance repeatedly. Changes in the financial industry made it easier for homeowners to tap their home equity through refinancing. Lenders provided adjustable-rate mortgages that enabled home buyers to pay higher prices while temporarily making low monthly loan payments. The housing market kept booming. Consumer debt and spending kept climbing.”
“Many households are happy with the results. Homeownership climbed above 69 percent in late 2004, which means millions more people gained a store of wealth that can grow and be available in hard times. And home values have skyrocketed, pumping up household wealth to a record $51 trillion in the third quarter, according to Fed data. But household debt rose faster in recent years than wealth or disposable income, reaching an unprecedented 126.1 percent of after-tax income in the third quarter, double its 1980 level.”
The party is over… we’re a nation addicted to debt. What should one do? Stop spending. Start saving. Quit using your house as an ATM. All topics discussed here numerous times.
Last Friday, the LA Times reported “the number of default notices sent to the state’s homeowners is up 15.6% in 2005’s last quarter from a year earlier.”
“The delinquency notices serve as an early indicator of possible foreclosures. Typically, about 5% of homeowners who receive such notices end up losing their homes. Lenders sent 14,999 default notices to California homeowners from October through December, according to DataQuick Information Systems.”
“The increase in delinquencies probably is a result of the decline in home appreciation in many markets over the last couple of years, DataQuick analyst John Karevoll said. While home prices were rising, homeowners were able to tap a growing pool of equity for loans or refinancing if they found themselves in financial straits.”
“But when prices don’t go up as fast, you don’t have that built-up equity like you did before,” Karevoll said. “People won’t have that buffer the way they did a year or two ago.”
“And financially distressed homeowners have largely been able to avoid foreclosures because rising real estate prices allow them to sell their properties instead. The state’s annual home appreciation rate peaked in the second quarter of 2004 at 22.8%. It has declined steadily since then. It was 14.5% in the fourth quarter of 2005.” DataQuick said.
Nell Henderson at the Washington Post reviewed Greenspan’s legacy and came away with this conclusion: As economy thrived under Greenspan, so did debt.
“Fed officials expected then that longer-term rates, such as mortgages, would rise as well, causing consumers to borrow less and save more. But it did’t work out that way. For several reasons -- low inflation, economic stability and foreign investors pouring their savings into U.S. stocks, bonds and other assets -- long-term interest rates fell for a year after the Fed started raising the benchmark rate and have stayed relatively low.”
“Mortgage rates also fell, prompting homeowners to refinance repeatedly. Changes in the financial industry made it easier for homeowners to tap their home equity through refinancing. Lenders provided adjustable-rate mortgages that enabled home buyers to pay higher prices while temporarily making low monthly loan payments. The housing market kept booming. Consumer debt and spending kept climbing.”
“Many households are happy with the results. Homeownership climbed above 69 percent in late 2004, which means millions more people gained a store of wealth that can grow and be available in hard times. And home values have skyrocketed, pumping up household wealth to a record $51 trillion in the third quarter, according to Fed data. But household debt rose faster in recent years than wealth or disposable income, reaching an unprecedented 126.1 percent of after-tax income in the third quarter, double its 1980 level.”
The party is over… we’re a nation addicted to debt. What should one do? Stop spending. Start saving. Quit using your house as an ATM. All topics discussed here numerous times.
posted by Nina Smith at 5:43 AM
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