They say that the next big real estate crisis is the collapse of the “commercial real estate market” but that’s too optimistic by half: we’re likely to see another sharp downturn in residential real estate as ever more mortgages go under water. A German analyst recently conclude that shortly half of American mortgages will be underwater, that is, worth less than the mortgage balance, and when the bank sells the properties at a steep discount it drives the market prices down. It’s fashionable to speculate that real-estate has hit bottom and found a floor just like its fashionable to speculate that the recession and our economic woes are over.
The stock market has enjoyed a reprieve and some of the big banks give the illusion of being on the mend. The fact that the government has stepped in to manipulate the market so as to avoid an unavoidable crisis will work for a time, just as it will with the banks, but as foreclosures mount the pressure continues to build. The reprieve we’ve seen in recent days in real estate and banking are largely an illusion brought about by foolish and ham handed attempts by government to stave off the inevitable consequences demanded by our behavior.
Commercial Real Estate is going to crash as the economy derails again within the next six months.
Residential Real Estate is going to crash again as foreclosures continue and as unemployment and inflation skyrocket.
Banks will continue to be stressed, even destroyed, as the real estate assets in all classes’ lose value from the foreclosure cycle.
Out of Control Government Debt and our Broken Political System will continue to drive down the value of the dollar, perhaps to catastrophic levels and more and more nations lose faith in us. Government intervention is destroying the economy, the currency, and perhaps the social cohesion of this nation.
We’re in a reprieve right now but don’t kid yourself: it’s going to get hairy again soon! It’s just a question of when the next shoe drops and if the economic and political structures can survive and events unfold.
Consider the following from the Associated Press:
Foreclosures rise 7 percent in July from June
By ALAN ZIBEL, AP Real Estate Writer Alan Zibel, Ap Real Estate Writer – 1 hr 57 mins ago
WASHINGTON – The number of U.S. households on the verge of losing their homes rose 7 percent from June to July, as the escalating foreclosure crisis continued to outpace government efforts to limit the damage.
Foreclosure filings were up 32 percent from the same month last year, RealtyTrac Inc. said Thursday. More than 360,000 households, or one in every 355 homes, received a foreclosure-related notice, such as a notice of default or trustee’s sale. That’s the highest monthly level since the foreclosure-listing firm began publishing the data more than four years ago.
Banks repossessed more than 87,000 homes in July, up from about 79,000 homes a month earlier.
Nevada had the nation’s highest foreclosure rate for the 31st-straight month, followed by California, Arizona, Florida and Utah. Rounding out the top 10 were Idaho, Georgia, Illinois, Colorado and Oregon. Among cities, Las Vegas had the highest rate, followed by the California cities of Stockton and Modesto.
While there have been numerous recent signs that the ailing U.S. housing market is finally stabilizing after three years of plunging prices, foreclosures remain a big concern. Foreclosures are typically sold at a deep discount, hurting neighbors’ home values.
The mortgage industry has been slow to adapt to the surge in foreclosures. Many lenders have needed government prodding to get up to speed with the Obama administration’s plan to stem foreclosures.
The Treasury Department said last week that banks have extended only 400,000 offers to 2.7 million eligible borrowers who are more than two months behind on their payments. More than 235,000, or 9 percent, those borrowers have enrolled in three-month trials in which their monthly payments are reduced.
“The volume of loans that are in distress simply overwhelms” those efforts, said Rick Sharga, RealtyTrac’s senior vice president for marketing.