OmegaMom

I thought, also, of titling this one, "The Wheels On The Bus Go Round and Round…", hoping to pass that hideous earworm on to my faithful readers.  But then I realized that would be cruel, and besides I had already given this post a title.  And then I realized that I could do both.  Bwahahaha!

Life has changed greatly in the past two and a half years.  Two and a half years ago, after a years’ worth of cruising my local real estate market and doing up a spreadsheet that showed the average asking price and average per-square-foot for houses in Hippy Dippy Enclave In The Woods, I googled "housing bubble" and found housing bubble blogs galore.  What a relief!  It wasn’t just me who was thinking that things were totally cockeyed in the world of real estate!

At the time, I thought many of the prognostications on the bubble blogs were a bit out of whack.  Commenters were gleefully anticipating the housing crash, and crowing that it would spread throughout the economy, ushering in a recession at the least and a depression at the worst.  I would raise a skeptical eyebrow as I read those particular prophecies.

In the meantime, it’s been like watching a movie when you’ve already read the book.  Everything–every damned thing–that those bubble bloggers and their commenters had laid out as the expected playing out of the bubble bursting has come to pass.  It’s pretty eerie.  What’s also eerie is that…well…the comments were full of common sense, and one kept wondering just why the mainstream media kept playing up the drumbeat of "it’s a whole new world out there!  Housing prices will never go down!"  The majority of economists cited by the MSM seemed equally purblind.

So I watched with amazement as the housing boom came to a screeching halt, and then as sales and prices started plummeting around the country.

One of the things that the bubble bloggers were talking about, way back when, was the coming tide of foreclosures.  They talked about "jingle mail"–where buyers who were negative on their mortgages and suddenly slammed with higher rates on their ARMs, would decide to just mail the keys to the house back to the lender, rather than fight against foreclosure.  And they said the immense number of foreclosures would bring the housing market down ever further, even quicker.

Well.  Let’s look at some things:

• 77% of the houses sold in Stockton, CA, in January were foreclosure sales (okay, in re-reading the story, it’s not clear whether that 77% is of all houses sold in Stockton, or of the houses sold by one particular broker).  In the Sacramento, CA, area there were 1,815 homes sold in January, but almost as many–1,782–foreclosures were recorded in that area in the same month.  Sit back and think about that–it’s just astonishing.
• Realtors are offering "foreclosure tour" buses, where the real estate salesperson grabs a list of foreclosing houses off the database, rents a bus, fills it with people who want to buy, and just spends a day shepherding these people from house to house, vacant, empty, owned by the bank.  The bank which is desperately trying to forestall further bleeding from the money accounts, and offering what seem to be bargain-basement prices.  Of course, some of these houses are going to be in dreadful neighborhoods, and some of the amazing deals will turn out to be money pits.  But there they are:  Pismo Beach, CA…Stockton, CA…San Jose…Las Vegas…Palm Beach, FL…Phoenix…Orlando…Michigan.
• Of course, someone has decided to cash in on the foreclosure business by offering a "how to put on a foreclosure bus tour!" seminar.  A few years ago, it was "how to make money fast, fast, fast by flipping real estate!"
• RealtyTrac claimed that there were 2,203,295 foreclosure filings across the country last year, on 1,285,873 properties, with more than 1% of all households across the country in foreclosure.  This was up 75% from the year before.  (Why are there more filings than properties?  I’d guess either some folks managed to close the door on the foreclosure wolf, or else some folks had more than one filing put on their property–people with multiple mortgages, perhaps.) 
• And homeless people have started moving into foreclosed houses as squatters.

The bubble blogs claimed that mortgage brokerage companies would start going out of business…and, sure enough, at the start of 2007 they started being able to track the bankruptcies.

But now it’s spreading.  The way that mortgages got purchased, chopped up, and resold as "investment vehicles", it turns out that a wide variety of financial investment companies find themselves holding the bag on loans going belly up.  The media has been playing up the "subprime mortgage" as the main culprit–mortgages handed out to poor credit risks.  But reports lately have shown that the same problems are showing up in the "more prime" mortgages as well…because what was risky was not just handing out money to people who could show they were breathing, but the fact that adjustable rate mortgages were the name of the game, people were mortgaging up to 100% of their new property, and people were taking out home equity lines of credit on their properties’ perceived value.  Now that housing prices are dropping, you’ve got ordinary everyday "good credit risks" who have discovered that their various mortgages and HELOCs have interest rates going up and they suddenly can’t pay what they were able to pay previously.

You’ve got real estate sales people who were making six figures two years ago who have had to quit the real estate business and get jobs.  You’ve got homebuilding companies that are either suddenly holding huge "sales" or else simply vanishing, even in Small Mountain University Town.  Even the companies that insure the financial investment companies against housing market losses are suddenly tottering.  Mortgage companies, trying to contact the mortgagees who flinch away from the phone ringing these days, are disguising their pleas to please pay up as wedding invitations (yes!).

And two years ago…two years ago, people were standing in line when new home communities opened their sales office doors, with prices ratcheting up $25,000 within a day as the hordes swept in.

What a difference two years makes.