Friday, August 29, 2008
Even Rich People Were "Victimized"!
Prime Foreclosure Starts Surge Past Subprime in July
There can be no remaining doubt that the nation’s mortgage crisis has become a problem for prime credit borrowers: data released by the HOPE NOW coalition on Wednesday finds that prime foreclosure starts have finally moved ahead of subprime foreclosure starts, for the first time since the industry coalition began collecting data in July of last year — and likely for the first time in a much longer timeframe, as well, sources suggested to HousingWire Thursday afternoon.
HOPE NOW’s monthly data shows that during July, foreclosures were initiated on 105,000 prime borrowers and 92,000 subprime borrowers. Prime foreclosure starts in July were well more than double the 51,000 recorded one year earlier, and up almost 10 percent from June; in comparison, subprime foreclosure starts in July were up 22 percent from one ago, and up 10 percent month-over-month as well.
"It’s easy for lawmakers to paint a picture of poor borrowers taken advantage of by big, bad lenders," said one source, a bank executive that asked not to be named. "But that story falls apart when you start to see even those higher up the credit ladder struggle."
This is an important event. How many times have you heard (or thought) that high-end properties were "different"? That they would never "do down in value". As this new data shows, the unthinkable is well underway. Of course, the expensive stuff hasn't really dropped everywhere, but that's a coming. Just in the last 3 months I have noticed a sharp downturn in the 700k-$1.2 million dollar homes in my local, tony hood. See that prior post for an example (be sure to note the hilarious UPDATES).
The next heretofore steady domino to fall will be, I predict, Manhattan.
Remember, prime foreclosures represent a much larger market than subprime and thus the dollar losses for banks, lenders, and homeowners will be enormous.