We all knew that the Housing Bubble had popped, leaving in its wake a shattered economy with a "real unemployment" figure above 16-percent, and an official nationwide average unemployment rate barely below 10-percent. The official figures for some places are higher than that; Michigan's unemployment rate is above 20 percent. That means that one in five people has no job, and with winter closing in, and with all programs offering recourse and assistance to people unable to pay the mortgage, there will be little or no options but either crime or migration.
Yet if you're thinking of migrating to Maryland or the rest of the Greater Washington DC Metropolitan Region, you might want to rethink that notion. It's getting a bit more grim here, and not just for the lower classes.
As we have
noted for quite some time now, the next big wave of foreclosures looms, mostly due to the resetting of so-called "option ARMs. The long and short of it is that all of the folks who should never have gotten a mortgage are already out on the street. Yet now comes the wave for people who could qualify for more standard mortgages, but who instead opted to pay "interest only" or even "only a part of interest" payments, rather than building equity in their homes by paying off the interest and some of the principal.
Most of these people at risk in the present day are not just "upside down" -- owing more, due to the time of the purchase in the inflated bubble, than the property could be sold for today -- they're upside down and also owe more interest than they did at the time of the signing, due to compounding and paying less than the full interest. This is the most truly "toxic" of the debt on the books of banks and mortgage financing firms. While the previously damaging "toxicity" was due to the fact that the market was in free-fall and nobody could even guess at valuations, this toxicity is that of a known poison. The market has effectively stabilized, or at least it's not in free fall. But as the "option ARM reset" moves forward, exactly one thing will happen: at a known rate, the market will continue to be driven down and the construction industry will remain idled, and may reasonably be expected to contract to perhaps new record lows... and remain at that low point.
Remember, there's no shortage of houses, there's just a shortage of people who can pay for them.
The Gazette notes that the people getting hit hardest now in Montgomery County are the backbone home-buyers, people nobody would ever in their worst nightmares expect to be failing to pay the mortgage.
No, it's the working class citizens with good credit who are getting evicted.
The circumstances of Bates's case are unusual — FHA loans carry unique regulations, and unlike many distressed homeowners, she was not "upside down" on her mortgage. As such, her case also embodies the changing struggle faced by that homeowners, lenders and government agencies: Maryland's foreclosure crisis is expanding amid a shifting landscape.
"These are not time-bomb loans. We're seeing more and more of them that weren't destined for failure out of the gate," said Mark Kaufman, deputy director of financial regulation for the Maryland Department of Labor, Licensing and Regulation. "The problems are much more people like Sonja Bates than the guys with the subprime loans. … It's continuing to evolve more towards your normal homeowners, and you're seeing it in cases like hers."
Montgomery County's most recent analysis revealed an unwelcome milestone: more than 10,000 mortgage defaults, notices of sale and lender purchases — classified as "foreclosure events" — since the beginning of 2007. Even signs of recovery — for example, 11 percent of foreclosed homes have been resold — come with the sobering corollary that the median home sale price in Montgomery County has in one year plummeted from $425,000 to $325,000.
The first three months of 2008 saw more than 1,600 foreclosure events. After state legislation took effect to require foreclosures to take 150 days, foreclosure events surged to nearly 2,000 during the first quarter of this year, by 20 percent the highest of any quarter on record.
The article goes on to point out that one of the worst-affected communities is Aspen Hill. Of course, I was pointing that out almost a year ago. Doesn't it suck to be the man who has a 100-percent accuracy record. It's especially troubling because such is the nature of these predictions that for them to become reality, it is necessary that nobody believe them. Yet here's the reality:
The growth is most pronounced upcounty and in pockets midcounty, especially Germantown, Montgomery Village and Aspen Hill.
Germantown's 20874 ZIP code saw 65 foreclosure events in the fourth quarter of 2008. At the time, that was 20 more than the next most active ZIP code. That figure skyrocketed to 122 in the first three months of this year, while Aspen Hill's 20906 ZIP code doubled to 88 and Montgomery Village — 20886 — jumped from 43 to 76.
And once again, the Gazette completely misses the mark. Aspen Hill, and its foreclosure problem, isn't limited to the 20906 zip code.
Gazette, please get your glasses on and look at this map:
The 20906 section of Aspen Hill is that part that lies east of Connecticut Avenue south of the intersection with Georgia Avenue, and east of Georgia Avenue north of that intersection.
2/3rds of Aspen Hill -- some 6220 homes, most single-family detached residential houses -- is in zip-code 20853. And we have got lots of empty houses over here, and most of those are foreclosure evictions.
In case the folks at the Gazette can't figure out by street name what are the parts of 20853 "Rockville" that are actually east of Rock Creek and thus not possibly in the City of Rockville, they can get a list here. Sure, about 10 of those streets are in "Silver Spring 20906" but the rest are in "the houses", the membership area of the Aspen Hill Civic Association, Inc.
1 comments:
And, of course, a certain number of the houses that do stay occupied are more likely to be overcrowded.
Last summer I went to a public hearing at the County Council building in Rockville and somebody from Aspen Hill told the audience a story.
A realtor went to an Aspen Hill house that was for sale. However, there was one room that she couldn’t get into, with a young boy guarding it. When she was finally able to open the door, a naked man and woman suddenly ran out. The landlord/seller exclaimed, when asked to explain this situation, “But she was just trying to work!”
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