RE and economic charts: Accelerating Jumbo Mortgage Delinquencies Will Hurt High-End Property Values

Tuesday, June 22, 2010

Accelerating Jumbo Mortgage Delinquencies Will Hurt High-End Property Values - Part 1 & 2

[mEDITate-OR:

wonder why the lack of new Jumbo mtgs funding has not shown up in a drop in prices...

These two parts of a six part series - rest incoming - provide a VERY interesting view.

The 1st chart shows U.S. that the price of all foreclosed home is going up.

The 2nd chart shows U.S. that the later the Jumbo loan was made the worse the defaults were.

The 3rd chart shows U.S. that the first wave of foreclosures, in 2008, was more from "securitized" RE loan packages and the second wave which is now beginning is more from both non-agency and GREs. Barkleys is ONLY securitized loans, where RealtyTrac and Lawler include both.

One reason for the 1st chart rise, might be that the massive increase in UI filings occurred in Sept-Oct of 08, and those who have lost jobs covered by UI tend to have less "reserves" to fall back on, and therefore lose their homes earlier. It might also be explained by the fact that the "sand states" were the most expensive and over valued RE markets, so that when they collapsed the prices of the home were much higher than normal.

One reason for the 2nd charts shift in default rates is that the closer we got to the peak before the collapse the more over valued, and now underwater, the Jumbo RE loans were. Also, with the total collapse of Jumbo funding, those who had just purchased COULD not sell their homes unless they could hold their own paper OR find an all cash buyer. The later, could find the exact same home, now for sale a 50% less. So, why would they buy an existing Jumbo priced home as the same price.

One reason for the 3rd charts shift might be that investment buyers were very interested in scooping up inexpensive homes, to rent and later resell. However, investment buyers had little or NO reason to buy one or two expensive homes when they could buy a lot of cheap ones. Now, however, the owners of Jumbo loan homes are trapped. They can't sell, and they can't recover, and they can't hold on much longer. Sad, very sad.

-------------