The Train Wreck of the US Housing Market 2013
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Transcript of The Train Wreck of the US Housing Market 2013
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8/14/2019 The Train Wreck of the US Housing Market 2013
1/2
The Co
The Continuing C
What would you do if you saw a train wrec
out of the way. So why dont many Canadia
our selves we have the sun in our eyes.
The sun will be shining, when the snow be
Yet those who purchase today will look bac
will have dropped, expenses will have escal
relaxation and will definitely not be the b
Although many Canadians are looking sout
states, indicate that the bottom is still no w
hardest and are poised to perform just as p
Phoenix is down 54% LA area down 42%
Las Vegas down 49% Tampa down 41%
This would lead one to believe that these,
any lower. Well, unfortunately that is not
factors; including job growth, population grnot mean good deals, if prices are going to
When analyzing the key economic fundam
average incomes slipping, higher taxes, co
incentives, all of these fundamentals are sh
The whole R-rated picture comes into view
look:
Many predicted that the foreclosure peak
with record number of US foreclosures beiforeclosure notices in the first 6 months of
the US government stimulus package and
It is even worse when you dig down to the
foreclosure notice in the first half of 2009,
and Colorado.
These numbers indicate that the market is
ing Train Wreck To Avoid
llapse of The US Housing Market T
about to happen and there was nothing you could
ns do that with their investment decisions? Simply,
ins to fly up in Canada, that alone is a big draw to b
k at that decision as just another poor holiday influ
ated and that piece of paradise will no longer be a
argain it may look like today.
for bargains, the fundamentals of the US housing
here in sight. The key sun-belt, snowbird states ha
oorly for years to come. For example, according to
Miami down 48%
San Fran down 46%
nd other sun-belt markets, are trading at a massive
hat the analysis is showing. Future real estate pric
owth, income growth along with simple supply andmove lower.
ntals of these regions a very nasty picture emerges
panies closing or moving to lower cost regions bec
owing negative signs.
when you factor in the coming foreclosure wave a
ould occur in the heart of the recession, in 2008.
g declared. A whopping 1.5 million properties in t2009, a 15% increase over the same period in 2008
ortgage incentive programs.
typical snowbird states. A full 6% of all housing un
he worst of any state, followed closely by Arizona,
bout to be flooded with much more supply, soften
o 2013
do to stop it? Youd get
because we cant help
uying property in the U.S.
enced decision. Prices
lace of peace and
market, especially in key
e already been hit the
the Case-Shiller Index:
discount and couldnt go
es are driven by many key
demand. Lower prices do
. Continued job losses,
ause of government
out to hit. Lets take a
et here we sit in 2009
e U.S. received. This occurred despite
its in Nevada received a
Florida, California, Georgia
ing prices even further.
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8/14/2019 The Train Wreck of the US Housing Market 2013
2/2
Some would interpret these numbers as a time for bargains, which may be true, if there were any fundamentals
showing this trend coming to an end. However, we must look at the precarious financial situation of those who still own
their home. A full 23% of mortgage holders in the US owe more on their home than the property is worth as of the 2nd
quarter of 2009. It is estimated by Deutsche Bank that this figure could jump to 48% of mortgage holders owing more
than their homes worth by first quarter of 2011
They should be able to hold on, as long as their job or income situation doesnt change or their neighbourhood isnt
filled with some of the millions of empty properties that blanket the US or their mortgage payments dont move
upwards. In other words, the prospects dont look very good for many of this 23%. We will witness many of these
properties become part of the coming tidal wave of properties for sale.
How about the remaining 77% who owe less than the property is worth and are still making their monthly payments
diligently? Are they out of the woods or are we going to see them also hit a brick wall even if they keep their job and
income? Sadly, it doesnt look overly positive for many of these homeowners either.
Why? Because we cannot ignore the pending re-set of hundreds of billions of dollars of Adjustable Rate Mortgages (that
dont even peak until May 2012). As these mortgage payments are adjusted up to market rates, from the low
introductory rates that allowed people to purchase properties they couldnt afford, an increasing number of
homeowners will not be able to meet these new monthly obligations forcing them to either sell or mail back the keys inforeclosure.
In the months of March to August 2009, payments on approximately $135 Billion of A.R.M.s were re-set and weve
already witnessed what that has done to the foreclosure numbers as they hit new record highs. In the same period in
2012, there will be another $221 billion of A.R.M. being re-set. This will be the peak period of these types of mortgages
being adjusted, which should also lead to the bottoming out of the property values in the US, which will occur in early
2013.
These mortgage payment adjustments will have a major impact as we are already witnessing how close to the edge
many American home-owners are. In the 2nd quarter of 2009 a new record was set in when almost 1 in 8 homeowners
either delinquent in payments or in the process of foreclosure. Add the new higher payments that are coming for many
of these and you can see how delinquency rates will soar.
The re-setting mortgages are no longer just the sub-prime mortgages that are being blamed for the current crisis, the
next 3 years of ARM mortgages were provided to higher quality borrowers (prime and Alt-A) right along side the sub-
prime market. Meaning these re-adjustments are going to begin hitting the heart of the US housing market middle
America.
The train is hurtling down the tracks do what you can to avoid being hit by it.
Conclusion: Canadians who can take the sun out of their eyes should make money in the Canadian real estate market,
then use this money to rent your vacation home in the US every year for as many weeks as youd like. Rents will be very
low for years to come AND you can choose your vacation location every year and not be saddled with having to go to ,
and maintain, the same spot year after year (unless you choose to).
Don R. Campbell
President, Real Estate Investment Network
www.reincanada.com