To the Kübler-Ross grief cycle and what fraction of the population seems to be in each emotion.
Stability: 50% (Old homeowners and bubble bloggers)
Immobilization: 25% (Prices dropping? Can't be.)
Denial: 5% (No! Real estate only goes up!)
Anger: 8% (This one must be discussed)
Bargaining: 3% (Ok, we can cut the price and lead the market)
Depression: 3% (We're going to lose our home. Just let them take it...)
Testing: 4%
Acceptance: 2% (Walk away, we're toast)
Still lots of anger out there... But less. Its as if we took a step back during the winter break?
The timeline stalled. No progress this month. I've slid the dates a bit, so I need to update the graph. Graph updated . But if you've been reading the blogs... Option-Arms are hitting their limits and thus the resets are really happening much earlier.
1. Optimism
2. Excitement
3. Thrill
4. Euphoria (market price peak) Peaked in late 2005/early 2006
5. Anxiety (I'm a long term investor, not a speculator.)
6. Denial (Reached in October of 2006 until mid-May of 2007)
****7. Fear (Reached in mid-May of 2007). *****Current state****
8. Desperation: Predicted to start in February/March 2008 edited from last month
9. Panic: Fall 2008 looks to be the start. I slid this a few months
10 Capitulation: Spring 2009 through the winter of 2009. Shifted... But still most of 2009
11 Despondency (start of market price bottom) Not before winter 2009. Possibly as late as 2010. Much more uncertainty here.
12 Depression (end of market price bottom) Not over before summer 2011, probably later. It could be as late as 2014.
13 Hope (hey, this investment has picked up off its bottom)
14 Relief (Its almost what I paid for it...) about 2017
15 Optimism (cycle starts again)
Sellers bet the farm (house) on appreciating real estate and those days are gone. This year will only begin to shake out the more feeble 'homeowners.' 2009 is still when I predict the greatest price drops (both nominal and real prices). The bottom is a long way off...
The option-ARM resets will be the motivator in 2008/2009. Not the planned resets, but the loans hitting their limits. Recall, over 90% of Option-ARM borrowers only pay the minimum, so that negative amortization is going to flatten them when the payments reset.
Upcoming article: I'm creating graphs of housing inventory data from my own data and a few of the inventory blogs. It will cover national, LA, and DC inventory.
edit (Warning PDF):
Countrywide ranks markets
The above countrywide document is a must read. (Hattip Crispy&Cole on HBB) Is your area a Category 5 or 4? Miami and Phoenix are 5's. LA and DC are 4's. I think the color coding in the document tells it all...
2nd edit: For Countrywide Purchase Loans:
Soft Market Category 4-5 loans: Maximum financing will be reduced by 5%
Soft Market Category 1-3 loans: Maximum financing will be reduced by 5% if the appraisal or appraisal review indicates any of the following: Declining Market, Oversupply, Marketing time over 6 months.
For Countrywide Home Equity Loans:
Soft Market Category 5 loans: Maximum financing will be reduced by10%
Soft Market Category 4 loans: Maximum financing will be reduced by 5%
Soft Market Category 1-3 loans: Maximum financing will be reduced by 5% if
the appraisal or appraisal review indicates any of the following: Declining Market, Oversupply, Marketing time over 6 months.
Hattip: Crispy again at http://bakersfieldbubble.blogspot.com/
edit #3:
New homes sales at worst on record:
http://biz.yahoo.com/ap/080128/economy.html
Got popcorn?
Neil
6 comments:
Neil,
Friend of ours was talking to their mortgage broker, and he told them that it's FC city out there. He just closed a loan for someone purchasing an FC for $350K that had last sold for $750K. The guy's thinking about starting one of those FC caravans!
TJ,
Oh man... you do realize that is a conforming foreclosure?!? (Of course, but I want to emphasize that.) What area was the FC?
Personally, its way too early for FC caravans. I'm waiting for a few months when the Aerospace moves get announced. :) Its not a question of if, but when and how many. That is contract dependent.
But I wish your friend luck. There is nothing wrong with advertising his business. May I recommend a magnetic set of signs for the rented bus? ;) I'm a big believer in advertising. (Kind of odd for an engineer... But I always accept I might not be the target market.)
Got popcorn?
Neil
I was not surprised that Seattle (King Co., WA) is a category 1 area.
I am surprised that much of New Orleans is listed as category 1. On the other hand, I guess it makes sense since property values are likely low, and did not rise with the bubble after Katrina, certainly.
Laura,
New Orleans is its own category. Thanks to government assistance, the risk for mortgage lenders is very low and that is what that table is all about: Risk to Countrywide.
Areas will move among the risk points as they progress through the cycle. 5's will crawl their way back up, but it will take years.
Got popcorn?
Neil
Neil,
The area was *your* current area -- somewhere north SCV/I14 corridor.
Sorry to confuse you. *My* friend was just doing a refi, and *his* broker was telling the story.
The broker feels he already has so much FC inventory available at such killer prices that a caravan is worth the effort. Like you, though, I'm waiting at least another year.
TJ,
Thanks for the update. I'm going to pass on the information to some of our fellow bears. They will probably keep waiting... but at some time people will pull the trigger.
The number of foreclosures in certain areas will be amazing... It will bring down prices everywhere if for no other reason than the tightening credit standards.
Got popcorn?
Neil
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