State of Foreclosure

Friday, March 13, 2009

Home foreclosure rates nationwide surged 30% last month. But the next phase of the crisis is already starting in places Cleveland, where at least 10,000 foreclosed houses sit abandoned. Journalist Alex Kotlowitz wrote about this part of the crisis in his article "All Boarded Up" for the New York Times Sunday Magazine recently. He’ll be joined by New Yorker staff writer George Packer who looked at the foreclosure disaster in Florida—a state where, until recently, felons couldn’t vote but could sell mortgages—in his artlce “The Ponzi State.”


Alex Kotlowitz and George Packer

Comments [9]

Jon P. from Hewitt, NJ

NABNYC from Southern California ,

Thank you, thank you, and thank you! Houses are still so ridiculously over valued. I’m so tired of hearing we have to bail everyone out to get those house prices up again. I don’t think anyone should be bailed out. For the buyers, if you can’t afford your home, you can’t afford your home, peroid…. For the banks, if you cant sell a house for $300,000 that’s really only worth $100,000 to $150,000, you have to sell it a lot closer to its true value. And to those who cry their $100,000 house is not worth $300,000 anymore, it never was worth $300,000 in the first place.

Mar. 13 2009 02:11 PM
NABNYC from Southern California

I just read that only 3% of the homes in the country were in foreclosure, although a total of 10% were in default. I think maybe we're focusing too much on "foreclosure," and ignoring the true problem, which is grossly inflated valuation in real estate.

When Greenspan held down interest rates to insanely low levels, in combination with Clinton and Rubin eliminating regulations for the financial cartels, it had the effect of creating a bubble in real estate. When people buy a home, they only ask how much will it cost per month. If interest is 6%, it will cost about $1800/month for a $300,000 home. If interest is held down to 3%, the same $1800/month could pay for a $600,000 home. So the real estate developers and brokers, and the lenders, all profited enormously from low interest. The public lost big-time. People suddenly were paying 10-12 times gross earnings of two adults to buy a home. In the 1960s, people paid 4 times gross of 1 earner.

The effect of all of this was not to increase homeownership, but to make it unlikely that anyone would ever own. They would effectively rent forever, unable to pay down the enormous mortgages they had taken on.

Let the foreclosures proceed. Let the bank take back the $600,000 loan and re-sell the home for $300,000. Or less. If the average family earns $55,000, and loans are regulated to 3 times gross, 80% max, that means most homes should sell for $150,000 - $200,000. We've got to bring all the values down or the market will remain frozen and headed for future disasterous collapses.

Mar. 13 2009 01:16 PM
J.C. from Minneapolis

If banks like Washington Mutual think they can thumb their nose at orders to appear for trial in housing court (I still can't believe they can get away with this), I'd close my accounts with them if I had an account with them.

Mar. 13 2009 12:40 PM
Carol from Manhattan

Is or was the housing market being used as a vehicle for money laundering? Did banks close their eyes and complicit in legitimizing money from illegal sources because they were making a lot of money in the process?

Mar. 13 2009 12:40 PM
Anthony from Long Beach NY from Long island NY

Why can't Pres Obama force the greedy banks to set all mortgage rates at a fixed 5 or 6%. This may stave off many forclosures.

Mar. 13 2009 12:36 PM
RLewis from The Bowery

How about asking your guests if the president who promoted the "Ownership Society" bares any responsibility for the current mess? Didn't he pretty much tell everyone that if you didn't own a home you'd be left behind???

Mar. 13 2009 12:35 PM
MichaelB from Morningside Heights

Why should we not be surprised, that the same institutions that blew it with the mortgages in the first place, do not know that forclosing on herds of homes is exactly the worst thing they could do and only exacerbates the problem?

As if the concept of mortgage foreclosure is a brand new concept and they had no clue.

What they lack is the smallest degree of imagination, incentive, or guts to look down the road a little bit and try to imagine what would happen "if"....

So again, neighborhoods, towns & cities -- society -- is harmed by the stupidity, shortsightedness, laziness -- and greed? -- of a group of businenss people.

Mar. 13 2009 12:31 PM
Mickey Bitsko from Downtown Manhattan

Sonny Kim? Why anyone would trust a person whose name rhymes with "Sunny Jim" is beyond me.

Mar. 13 2009 12:31 PM
Alvin from Manhattan

Real estate fraud is nothing new in Florida. As Groucho Marx said in the 1929 film "The Cocoanuts" (which took place in Florida):
"You can have any kind of a home you want. You can even get stucco. Oh, how you can get stucco."

Mar. 13 2009 12:07 PM

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