Home Foreclosure News: Consumers Spend More — Experts Say It’s Because Many Have Stopped Paying Their Mortgages
It’s funny, a few weeks ago I was talking to a friend of mine who is a realtor. She also happens to be an investor and landlord.
Upside Down Real Estate Investor Considers Voluntary Foreclosure
She’s upside down on a few of her homes and many a time has entertained the idea of throwing in the towel – eg, doing a voluntary foreclosure on a few of her properties. But, each time she’s “come back to her senses” (her words, not mine) and decided to soldier on and wait for the housing market to rebound.
Anyway, as we were discussing how crowded both of us had noticed how the retail outlets have been (eg, WalMart, Starbucks coffee shops and movie theatres), she said:
It’s because a lot of people have let go of these expensive-a** mortgages. Now they can afford to spend some money.
As I said, this was a few weeks ago. And, I’ll be damned if it looks like she wasn’t right. Financial/economic experts are saying that the current economic rebound can, at least in part, be attributed to the fact that many homeowners have simply stopped paying their mortgages.
Oh, they’ve continued to pay other bills, but not paying the biggest expense each month has apparently freed up some cash and many are doing a little retail therapy (ie, shopping, eating out, going to movies, etc.). You can view the finance expert in video of the BusinessInsider.com post, Meredith Whitney: The Rebound In Consumer Spending Is Just The Result Of People Not Paying Their Mortgages.
Home Foreclosure & Other News Made by Wall Street Finance Expert on CNBC
Now that government is out of the picture, we seem to getting a clear picture of not only the home foreclosure market, but the credit market and job markets as well. And people, it ain’t pretty. Here’s a roundup of what Wall Street finance expert Meredith Whitney had to say in the video in the link above.
States Are Missing Revenue Homeowners Provide in Property Taxes
States are under water by 200 billion and the government has only offered $50 billion to help. This has led many to cut jobs (at least 2 million nationwide). Programs that affect the poor and the well-to-do alike are being cut.
CA, FL, AZ, NV are states that are severely underwater — because of the housing crisis.
On Consumers NOT Paying Their Mortgages
Consumers not paying mortgages, they’re only paying quote “necessary” bills. This gives consumers more cash because they’re not paying the biggest expense that most of us have (our mortgages). And this is the reason retail spending is up.
Note: Four banks control 2/3 of the mortgages in this country (didn’t know that — surprised the heck out of me. Can someone say, “Monopoly!”). Maybe that’s why banks have been so slow to work with homeowners, ie, write down principal balances and do “realistic” home loan modifictaions).
On Banks, Foreclosure Programs & Home Housing Prices
Banks are accelerating their short sale and foreclosure programs. This means that those who aren’t paying mortgages now will start to have to pay rent – somewhere! FYI, the price of a home usually drops some 20% when a bank does a short sale on it.
Housing prices are going down again – they’ve gone down in the last 8 quarters. Banks have a lot of “rotten assets” (ie, bad mortgages) on their balance sheets.
In 2009, Fannie Mae and Freddie Mac provided more than 95% of all mortgages issued. They’ve in fact kept the mortgage market afloat. What does this mean for the housing market in general? Basically that the activity we’ve seen has been “government induced.” How? 45% of the new mortgages generated in 2009 were under the first-time homebuyer program where buyers got an $8,000 tax credit to purchase.
Corporate America Seems to Have Rebounded (On the Backs of “The Average Joe”)
Large corporations are doing really well (surprise, surprise). But guess what, they’ve fired 3 million workers in this credit cycle. Small businesses have also had a firing spree – firing 5 million workers.
What Happens Now – To the Housing Market, the Credit Markets, the Future for Homeowners
The bottom line is – and I feel like such a broken record here, until the job market comes back strong, it’s going to be tough going. More homeowners are going to lose their homes – and go into a rental market. Many will struggle get (hence, be able to use) credit because your credit takes a hit when you lose your home. And it can take years to rebuild.
And not for nothing, states and local municipalities will be hitting the pockets of those who manage to hang onto their homes harder – because they’re facing record deficits (ie, when there are less homeowners paying property taxes, there’s less money in local government coffers). So what do they do to make up for it? Raise the property taxes on existing homeowners.
Why Many Homeowners Have Stopped Paying Their Mortgages & Are Doing Voluntary Foreclosures
And this is why, in my opinion, many homeowners have looked at the long-term picture and just decided to ditch their homes and start over – maybe buy in 3, 5 or 7 years (and get a better deal) instead of holding onto an underwater cash sucker now.
Home Foreclosure Revenge: Why the Average Joe Is Fed Up . . . and Many Aren’t Taking It Anymore
Until banks and other mortgage holders get realistic and start writing down the principals on mortgages of homeowners who are underwater – and give them realistic monthly payments that reflect the housing, job and credit markets we’re in — THEY’RE going to be the ones holding the bag because you know what, the “average Joe” is friggin’ fed up with getting stuck holding the bag.
And, they’re not taking it any more and are walking away from their homes.
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Copyright © 2010 Yuwanda Black for Foreclosure Business News. Article may not be reprinted or reproduced in any manner without the express, written consent of the author.