"Full-Blown Recession"

Dude, that is a huge statement.

Mark Zandi, chief economist at Moody's Economy.com, says that housing is in a "full-blown recession."

Listen to this interview at Marketwatch.com:
http://www.marketwatch.com/tvradio/player.asp?guid={7AE3CA10-3E79-4840-87A0-6FDC5F3862FA}


Zandi is reacting to the National Assn of Realtor's report, which came out today.
The report's overall message is that sales are very slow and prices are down. You can read about it in the Star Trib:
http://www.startribune.com/535/story/1384888.html

Zandi has some good points, but I don't agree with him on everything.
He says on of the reasons we have such a big backlog of homes on the market is because of the number of foreclosures (agreed). But, here's where we disagree: he believes that the number of foreclosures will slow down, and the market will catch up. I actually believe we will see more foreclosures in the next year or two. If the market picks up, it will have to be in spite of high numbers of foreclosed properties on the market.

I believe foreclosures are because of the ARM financing and refinancing, and I don't think all of the ARMs that were sold have kicked in at the high rates yet. We've got a couple more years.

In the Zandi interview they say foreclosures represent about 7% of the market. I will tell you that some neighborhoods have more than than. St. Paul's North End is hit hard, North Minneapolis, St. Paul's East Side....
The Strib has a very well done map of foreclosures you can access from the front page of the Strib site.


I also published a post a while back about how foreclosures weren't such a great deal. The Strib did a story on another angle of that -- it takes eons for the banks to respond to your offers on foreclosed properties.
http://www.startribune.com/417/story/1384058.html

The foreclosures are throwing this market for a real loop.
If you are an owner of a 3 bed, 1 bath, 1500 square feet, and you think your house is worth about $250,000, but the foreclosed 3 bed, 1 bath, 1500 square feet with no appliances and smashed walls goes for $180,000 --- well, your $250,000 price will get close scrutiny.

The good news that everyone keeps missing in all of this is that it is a fabulous time to buy property. There are tons of options out there, and prices are amazing.

But to stop the bleeding in the foreclosed properties, both the government and the banks are going to have to step up. People got sold into products that were inappropriate for their financial situation (ARMs, etc.). The bank should be willing to refinance these mortgages and spare everyone the work and money that a foreclosure costs everyone. Certainly, there are some people who are actual deadbeats that aren't paying the bills -- but there are others that got suckered into a mortgage product they don't understand. Like 78 year old ladies and Hmong single moms that don't speak very good English. Those are the people that need a bail-out -- they were sold inappropriate products. I wish the damn mortgage brokers that sold them the products were held accountable and were required to fix those situations.

A concerted effort between banks and government could do a world of good -- but I don't think that will happen.

In the mean time, happy shopping.