Subprime Mortgages Fall Massively Delinquent. Taxpayers on Hook. Housing Market Splits in Two

On one side: land rush by a few hundred thousand home buyers. On the other: millions of homeowners with delinquent mortgages. Here are the metros by FHA delinquency rate. Two exceed 27%.

By Wolf Richter for WOLF STREET.

The Federal Housing Administration (FHA) prides itself in insuring subprime mortgages with, as it says, “low down payments,” “low closing costs,” and “easy credit qualifying” – all true. Of its active portfolio of 8 million mortgages that it insures, 17% were delinquent in July, the highest rate in FHA history. In many metros, the delinquency rates of FHA mortgages are above 20%; and in two metros, the delinquency rates exceed 27%.

The delinquency rates include mortgages that were delinquent and then entered a forbearance agreement with the lender, where the lender agreed to not pursue its rights due to nonpayment of the mortgage. During the term of forbearance – six months, under the CARES Act, extendable by another six months – the borrower isn’t making payments, but the missed interest and principal payments are added to the mortgage balance and will need to be paid somehow.

A FICO credit score below 620 is considered “subprime.” The FHA insures mortgages of borrowers with credit scores well below that.

  • If the borrower has a credit score of at least 580, the FHA will accept down payments of only 3.5%.
  • If the FICO score is below 580, no problem, but then down payment is 10%.

Many of the people whose mortgages the FHA insures have lost their jobs or had had their hours or work reduced.

In terms of the lenders, the good thing is that they don’t carry the risk. The FHA and thereby the taxpayer carry the risk.

In terms of the taxpayer, the good thing is that home prices have risen in many markets in recent years, and are rising there right now, and that many fallen-behind homeowners can sell their home and pay off the defaulted mortgage with the proceeds from the sale, and maybe have a little cash left over. And if the home goes into foreclosure because the proceeds wouldn’t have been enough to pay off the mortgage, the losses would be relatively small.

The widespread home price declines that occurred during the subprime crisis of Housing Bust have not happened yet. And that’s why at the moment no one is panicking about these sky-high delinquency rates.

But when millions of homeowners cannot make the mortgage payments and have to put these millions of homes on the market – forced sellers – they trigger a sudden surge of supply of homes for sale, and the entire supply-and-demand equation, and thereby the pricing environment, are going to change.

During the last Housing Bust, this phase happened, but it didn’t happen up front. Home prices started falling for other reasons, and then forced sellers and then their lenders tried to sell their homes, which put enormous downward pressure on prices.

This time around, the housing market has split in two:

On one side of the population, there is some sort of land rush going on at the moment, with people trying to buy everything in sight. On the other side are people who’re delinquent on their mortgages.

But the numbers are skewed: There are on average 460,000 people buying a home every month. But there are now millions of people behind on their mortgages, including 1.4 million whose mortgages are insured by the FHA.

American Enterprise Institute’s Housing Center, which collected the delinquency data from FHA Neighborhood Watch, sees the eventual impact of the FHA delinquencies in this way:

It would be expected that these delinquency percentages will increase over time. At some point, a significant percentage of the then delinquent loans would be expected to be placed on the market by owners under distressed conditions or become foreclosures, and then enter the market.

It is at that point we would expect buyer’s markets to develop in zip codes with heavy exposure to FHA and other high-risk lending combined with high levels of delinquency.

So there is a boom on one side of the housing market, and there is already a bust forming on the other side of the housing market.

FHA mortgages are far from the only delinquent mortgages, and Fannie Mae, Freddie Mac, the VA, Ginnie Mae, and others are also experiencing surging delinquency rates — just not to this extent. So the FHA delinquencies are just a segment of the show.

The table below shows the 167 Metropolitan Statistical Areas (MSA) and their FHA loans, in order of the delinquency rate of those FHA loans (4th column). It also shows the number (not dollars) of active FHA mortgages in that MSA (3rd column) and the share of FHA mortgages in that market as a percent of total mortgages (by number of mortgages, not dollars). In some markets, FHA mortgages have a share of over 20%, and in other markets a share in the low single digits. The problems will be larger where the FHA share is higher.

You can use your browser’s search box to find your MSA. If your smartphone clips the 5th column, hold your device in landscape position.

Metropolitan Statistical Area # active mortgages % delinquent FHA Share by count
1 Nassau County-Suffolk County, NY 57,026 27.8% 15.4%
2 New York-Jersey City-White Plains, NY-NJ 90,521 27.2% 9.7%
3 Newark, NJ-PA 53,191 26.3% 18.2%
4 Fort Lauderdale-Pompano Beach-Sunrise, FL 49,224 25.8% 19.5%
5 Poughkeepsie-Newburgh-Middletown, NY 14,493 25.0% 15.6%
6 Miami-Miami Beach-Kendall, FL 55,397 24.4% 20.0%
7 Bridgeport-Stamford-Norwalk, CT 16,047 24.2% 12.0%
8 New Orleans-Metairie, LA 37,531 22.6% 17.1%
9 West Palm Beach-Boca Raton-Boynton Beach, FL 33,660 22.2% 17.4%
10 McAllen-Edinburg-Mission, TX 19,633 22.0% 35.2%
11 Washington-Arlington-Alexandria, DC-VA-MD-WV 135,757 22.0% 13.7%
12 Chicago-Naperville-Evanston, IL 177,263 21.9% 14.2%
13 Houston-The Woodlands-Sugar Land, TX 212,956 21.6% 19.3%
14 Naples-Marco Island, FL 7,672 21.4% 14.0%
15 Camden, NJ 59,015 21.4% 26.1%
16 San Rafael, CA 258 21.3% 1.6%
17 Lafayette, LA 10,509 21.1% 16.8%
18 Atlanta-Sandy Springs-Alpharetta, GA 251,386 21.0% 21.0%
19 Philadelphia, PA 73,829 20.3% 17.6%
20 Frederick-Gaithersburg-Rockville, MD 28,835 20.1% 12.7%
21 Orlando-Kissimmee-Sanford, FL 83,307 20.0% 21.6%
22 Corpus Christi, TX 13,809 19.9% 23.1%
23 New Haven-Milford, CT 28,439 19.9% 20.7%
24 Boston, MA 22,215 19.7% 8.3%
25 Barnstable Town, MA 3,015 19.7% 7.4%
26 Baton Rouge, LA 28,235 19.6% 19.8%
27 Baltimore-Columbia-Towson, MD 108,235 19.5% 19.4%
28 Gary, IN 32,105 19.5% 22.3%
29 Las Vegas-Henderson-Paradise, NV 71,683 19.4% 16.9%
30 Shreveport-Bossier City, LA 15,243 19.3% 23.2%
31 Port St. Lucie, FL 17,306 19.0% 24.9%
32 Dallas-Plano-Irving, TX 143,996 18.9% 14.8%
33 Cambridge-Newton-Framingham, MA 23,691 18.8% 7.5%
34 Oakland-Berkeley-Livermore, CA 21,198 18.8% 6.1%
35 Lakeland-Winter Haven, FL 31,672 18.6% 34.0%
36 San Antonio-New Braunfels, TX 90,021 18.6% 19.3%
37 Charleston-North Charleston, SC 21,712 18.6% 13.7%
38 Savannah, GA 12,643 18.5% 16.1%
39 Mobile, AL 17,110 18.4% 24.3%
40 Beaumont-Port Arthur, TX 10,177 18.4% 22.9%
41 Wilmington, DE-MD-NJ 30,106 18.4% 23.5%
42 Birmingham-Hoover, AL 39,782 18.3% 18.2%
43 Cape Coral-Fort Myers, FL 26,035 18.3% 21.6%
44 San Jose-Sunnyvale-Santa Clara, CA 4,497 18.3% 2.3%
45 Elgin, IL 25,424 18.2% 19.9%
46 Los Angeles-Long Beach-Glendale, CA 93,217 18.1% 9.7%
47 Fort Worth-Arlington-Grapevine, TX 83,880 18.1% 18.3%
48 Urban Honolulu, HI 4,674 18.1% 4.0%
49 Columbia, SC 30,466 18.0% 18.8%
50 Oxnard-Thousand Oaks-Ventura, CA 7,730 17.9% 8.7%
51 Anaheim-Santa Ana-Irvine, CA 15,270 17.9% 5.3%
52 Lake County-Kenosha County, Il-WI 22,799 17.8% 12.8%
53 Hartford-East Hartford-Middletown, CT 43,274 17.8% 19.5%
54 Worcester, MA-CT 20,657 17.8% 15.1%
55 San Diego-Chula Vista-Carlsbad, CA 25,983 17.8% 7.0%
56 Allentown-Bethlehem-Easton, Pa-NJ 30,198 17.8% 22.2%
57 Vallejo, CA 9,589 17.5% 16.4%
58 Jacksonville, FL 49,106 17.5% 16.1%
59 El Paso, TX 36,085 17.5% 26.9%
60 Albany-Schenectady-Troy, NY 25,063 17.4% 15.0%
61 Springfield, MA 15,883 17.4% 17.4%
62 Memphis, TN-MS-AR 58,994 17.3% 21.6%
63 Charlotte-Concord-Gastonia, NC-SC 76,566 17.3% 13.7%
64 Tampa-St. Petersburg-Clearwater, FL 93,787 17.2% 19.6%
65 Durham-Chapel Hill, NC 11,023 17.2% 8.0%
66 Montgomery County-Bucks County-Chester County, PA 42,650 17.1% 11.7%
67 Riverside-San Bernardino-Ontario, CA 133,256 17.1% 20.6%
68 Greeley, CO 11,611 16.9% 20.7%
69 Reading, PA 15,089 16.9% 23.7%
70 Raleigh-Cary, NC 30,861 16.9% 8.8%
71 Stockton, CA 18,594 16.9% 18.0%
72 Little Rock-North Little Rock-Conway, AR 27,498 16.8% 16.6%
73 Cleveland-Elyria, OH 69,254 16.7% 17.7%
74 Detroit-Dearborn-Livonia, MI 46,751 16.6% 19.1%
75 Greensboro-High Point, NC 23,956 16.5% 15.3%
76 North Port-Sarasota-Bradenton, FL 18,633 16.3% 14.3%
77 Augusta-Richmond County, GA-SC 21,130 16.2% 17.8%
78 Austin-Round Rock-Georgetown, TX 53,496 16.2% 10.6%
79 Santa Rosa-Petaluma, CA 3,344 16.1% 6.6%
80 Sacramento-Roseville-Folsom, CA 43,740 16.1% 13.2%
81 Providence-Warwick, RI-MA 45,916 16.0% 19.0%
82 Virginia Beach-Norfolk-Newport News, VA-NC 62,661 15.9% 14.4%
83 Anchorage, AK 11,628 15.9% 13.9%
84 Denver-Aurora-Lakewood, CO 71,712 15.9% 13.9%
85 Lubbock, TX 11,749 15.8% 19.2%
86 Scranton–Wilkes-Barre, PA 14,564 15.8% 21.5%
87 Greenville-Anderson, SC 25,854 15.7% 17.5%
88 Warren-Troy-Farmington Hills, MI 65,970 15.7% 11.7%
89 Toledo, OH 16,804 15.7% 14.1%
90 Punta Gorda, FL 5,035 15.7% 16.4%
91 Richmond, VA 51,923 15.5% 17.7%
92 Tacoma-Lakewood, WA 24,945 15.5% 16.4%
93 Milwaukee-Waukesha, WI 26,398 15.4% 8.1%
94 Flint, MI 13,536 15.4% 21.3%
95 Winston-Salem, NC 20,002 15.4% 15.3%
96 Deltona-Daytona Beach-Ormond Beach, FL 22,382 15.4% 22.4%
97 Bakersfield, CA 34,054 15.3% 26.5%
98 Syracuse, NY 22,059 15.2% 16.4%
99 Wichita, KS 21,985 15.2% 16.1%
100 St. Louis, MO-IL 98,999 15.1% 15.2%
101 Seattle-Bellevue-Kent, WA 36,066 15.1% 7.5%
102 Columbus, OH 66,178 15.1% 13.6%
103 Daphne-Fairhope-Foley, AL 5,826 15.1% 12.1%
104 Indianapolis-Carmel-Anderson, IN 86,797 15.0% 18.0%
105 Salisbury, MD-DE 9,881 15.0% 10.9%
106 Tulsa, OK 34,777 15.0% 20.4%
107 Oklahoma City, OK 53,384 14.9% 18.6%
108 Nashville-Davidson–Murfreesboro–Franklin, TN 66,809 14.9% 16.7%
109 Chattanooga, TN-GA 18,873 14.9% 18.5%
110 Modesto, CA 15,026 14.8% 21.6%
111 Rochester, NY 34,158 14.8% 14.3%
112 Palm Bay-Melbourne-Titusville, FL 17,715 14.7% 17.7%
113 Myrtle Beach-Conway-North Myrtle Beach, SC-NC 10,748 14.7% 10.1%
114 Tallahassee, FL 10,092 14.7% 15.2%
115 York-Hanover, PA 18,040 14.5% 20.7%
116 San Francisco-San Mateo-Redwood City, CA 924 14.5% 0.8%
117 Wilmington, NC 5,974 14.5% 9.3%
118 Cincinnati, Oh-KY-IN 73,460 14.5% 15.5%
119 Boulder, CO 2,792 14.4% 4.5%
120 Huntsville, AL 15,798 14.4% 12.3%
121 Pittsburgh, PA 68,397 14.4% 14.9%
122 Fort Collins, CO 4,674 14.4% 8.8%
123 Lancaster, PA 13,693 14.4% 13.5%
124 Minneapolis-St. Paul-Bloomington, MN-WI 92,996 14.3% 11.2%
125 Asheville, NC 5,345 14.3% 8.1%
126 Kansas City, MO-KS 70,779 14.3% 15.3%
127 Clarksville, TN-KY 8,551 14.3% 14.5%
128 Youngstown-Warren-Boardman, OH-PA 15,664 14.2% 20.7%
129 Killeen-Temple, TX 11,603 14.2% 12.8%
130 Ocala, FL 9,854 14.1% 21.5%
131 Ogden-Clearfield, UT 22,045 14.0% 15.6%
132 Fort Wayne, IN 16,297 14.0% 15.6%
133 Akron, OH 23,478 13.9% 16.4%
134 Salt Lake City, UT 36,731 13.9% 15.2%
135 Grand Rapids-Kentwood, MI 24,557 13.8% 10.5%
136 Portland-Vancouver-Hillsboro, OR-WA 38,084 13.8% 10.6%
137 Crestview-Fort Walton Beach-Destin, FL 5,191 13.8% 8.0%
138 Pensacola-Ferry Pass-Brent, FL 13,157 13.8% 13.3%
139 Phoenix-Mesa-Chandler, AZ 137,348 13.8% 15.6%
140 Des Moines-West Des Moines, IA 18,475 13.8% 10.8%
141 Buffalo-Cheektowaga, NY 35,660 13.6% 14.0%
142 Colorado Springs, CO 18,309 13.6% 10.7%
143 Louisville/Jefferson County, KY-IN 46,424 13.6% 16.2%
144 Manchester-Nashua, NH 10,156 13.5% 13.8%
145 Fresno, CA 26,768 13.5% 19.7%
146 Knoxville, TN 24,647 13.4% 15.9%
147 Dayton-Kettering, OH 28,632 13.4% 16.2%
148 Madison, WI 4,873 13.4% 3.8%
149 Omaha-Council Bluffs, NE-IA 29,620 13.4% 11.5%
150 Albuquerque, NM 38,673 13.4% 21.1%
151 Tucson, AZ 31,751 13.2% 16.5%
152 Harrisburg-Carlisle, PA 17,682 13.1% 15.4%
153 Canton-Massillon, OH 14,633 13.1% 19.7%
154 Provo-Orem, UT 14,869 13.0% 13.4%
155 Lansing-East Lansing, MI 14,874 12.8% 14.6%
156 Visalia, CA 17,333 12.4% 29.4%
157 Eugene-Springfield, OR 6,693 12.0% 12.3%
158 Bend, OR 3,039 12.0% 9.3%
159 Kalamazoo-Portage, MI 6,716 11.9% 13.5%
160 Lexington-Fayette, KY 13,791 11.6% 13.0%
161 Reno, NV 9,549 11.6% 12.8%
162 Prescott Valley-Prescott, AZ 4,219 11.5% 12.9%
163 Panama City, FL 4,337 11.4% 15.4%
164 Salem, OR 10,050 11.3% 15.7%
165 Spokane-Spokane Valley, WA 14,586 11.2% 11.9%
166 Boise City, ID 21,243 11.0% 11.9%
167 Springfield, MO 13,454 10.5% 14.7%
168 Fayetteville-Springdale-Rogers, AR 16,567 10.0% 13.5%
169 Lake Havasu City-Kingman, AZ 4,295 9.9% 13.5%

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  140 comments for “Subprime Mortgages Fall Massively Delinquent. Taxpayers on Hook. Housing Market Splits in Two

  1. Augusto says:

    Not sure taxpayers are on the hook, unless of course we have to pay for a new monetary printing press in Washington, preferably with both real and digital (invisible) ink. No need to pay taxes any more just print it all, like Marx says…”From each according to his ability (I have no money, therefore no taxes will be payed) to each according to his needs (I told you I have no money, lots of needs, so where is my government cheque). Will that be cheque, banker’s draft, e-transfer, direct deposit, bitcoin or SDR’s….that’s all we need to know now. And yes, if you feel you have to issue bonds first, by all means……..just get me my cheque.

    • No Expert says:

      Marx was talking about material needs (or ‘use value’ is his actual term).

      Nice article Wolf, thanks. Where is the demand coming from on the land rush side of this do you think? Share market proceeds? Reminds me a bit of what i have seen described as a K shaped recovery, one class of individuals (asset owners on a big upward win, the rest on a steep dive getting crushed by unemployment etc).

      • Dale says:

        I saw a chart comparing home ownership by generation over the last few decades. Millennial home ownership is up sharply since late last year, every other gen is down.

        • Dale says:

          To be clear, Millennials up, every other gen down except Gen Z, in the last 6 years. Gen Z is so low, and its increase so modest, because they are just starting to buy homes, that I mistook them for the x-axis.

        • rul82 says:

          I know millennials that have bought more than one house. They have seen house prices rise so much, they see it as a good investment.

      • Ralph Hiesey says:

        Dear Mr. No Expert:

        Here’s my guess–I’m also no expert:

        Demand side: Top 3% of wealth holders.

        Getting crushed: Bottom 90% of wealth holders

        • Jon M says:

          Nope. I am an expert. It’s not the top 3%. Probably closer to top 40%. Many are leaving the cities for the suburbs to escape the ongoing civil unrest.

    • M says:

      Of course, we are on the hook. The “Federal” bankster “Reserve” cartel will buy the banksters’ bad real estate debts (whether the banksters are foreigners or US citizens), so taxpayers will have to suffer the losses, since they will have to bail out the “Federal” Reserve, whose financiers control the US government. This pandemic is not going anywhere, so progressively many more persons will default as time passes and more businesses fail.

      We have only seen the tip of a huge iceberg thus far. I pray that I am wrong but I doubt it. I just wonder if the total bail out cost to the US taxpayers will be over the $29 TRILLION that the 2008-2011 bailouts to the banksters cost. See, e.g., CNBC.

      Our government reportedly just decided to deprive any state who might try the traditional, scientific method (short of a lockdown and formal quarantining) of testing then contact tracing and contact isolation, of the necessary testing resources. It is not even listening to good advice about how to contain this pandemic and has made its own scientists into pariahs.

      • Dale says:

        The Fed is the national shaman, working always to raise animal spirits and keep them alive, regardless of moral hazard.

        As a result of having done this for at least 33 years now, debt / income levels are outrageously high.

        The Fed has burned down the financial system, in order to preserve the financial system.

      • Winston says:

        Savers are also getting monumentally hosed. Headline at Marketwatch today: “Fed might never hike rates again, and these are your growth stocks for the long run, in one strategist’s view.”

        • YuShan says:

          You never hear anybody about the fact that there always has to be SOMEBODY holding the $7T cash that the Fed has created and that 0% interest minus inflation is a massive negative income effect.

        • Cas127 says:

          YS,

          Another good point…the MSM sphincters-of-the-state have spent 20 yrs ignoring the fact that if the Fed taxes away 100% of the earning power of the USD through printing, trillions of dollars held by savers will respond by not being spent.

          The truly crappy economic performance of the last twenty yrs reflects this…but the Fed chooses only to go down the ZIRP path of perpetual failure.

          This indicates that DC really doesn’t care about macroeconomic success…merely going through motions intended to perpetuate its own corrupt, incompetent, unjustifiable power.

        • rhodium says:

          There are almost no good reasons to invest in bonds anymore. The only one I can think of if you’re not in on the ponzi scheme of HY bonds is to avoid losing value to inflation as fast as you would with cash.

          This leaves people with a few options: buy real estate, stocks, precious metals, or a straight jacket. You could also just give in to financial repression and blow all the money, don’t save a thing. Then they will chide you for not saving when you go to retire, so basically the fed wants you to have your cake and to eat it too. Print cake Jerome!

        • YuShan says:

          Many people are really between a rock and a hard place. It’s either seeing the buying power of your savings decrease steadily with several percent per year, or jump on the housing, stocks, PM bubble and risk losing 50-70% in one year.

          We have only seen valuations this high in a few occasions in history (1929, 2000, 2007), and all have ended in a >50% crash.

          So pick your poison.

          Many people (especially older, retired folks) can really not afford losing 50% of their savings so they have no choice but to reduce their spending and hope that the prices of essentials don’t rise too fast.

      • Questa Nota says:

        Expect some announcements of opportunity funds buying up that distressed debt, with downside risk picked up by taxpayers. That was in the 2008 playbook and will be repeated, to the benefit of investors and the detriment of those having to exist in deferred-maintenance rentals. Whole sub-markets were bought out by a few companies so rents spiked and expenses were cut. Ask tenants how responsive their new landlords are and ask yourself if you’d like to be next when trying to find a place to live.

      • RagnarD says:

        $29T? Well, one thing is clear, its not going to be paid back in any legitimate form. Either defaulted or inflated. Smart money is currently betting on inflated. So protect urself accordingly.

      • Bobber says:

        I think we are past the point of “taxpayers” funding any losses. Today and going forward, the Fed encourages deficits and then prints money to delay problems. This means people with USD wealth will probably foot the bill when the system explodes, not average taxpayers. When you have no wealth, you have nothing to lose. You want a catastrophe and reset.

        Neither party has the guts to lay down anything but mild forms of austerity. The bill for everything will keep growing until the Fed’s Great Crash begins. The Fed is positioning for one final body slam of the public before it collapses. After that it may be over.

    • hendrik1730 says:

      The taxpayer is on the hook as soon as the FHA turns belly up. The same happened with the Belgian taxpayer in 2008 when Dexia bank toppled over. Dexia was insured through AIG – and AIG toppled over during the GFC. Today, the Belgian taxpayers are facing a rest-debt of 35 billion dollars in the form of a state-covered bank guarantee while the bad bank of Dexia is still being liquidated ( and given the actual problems, this outstanding bad debt will resurface somehow. The EU already stated these 35 billions have to be taken into account when reporting the consolidated government debt for Belgium ).

      The taxpayer ALWAYS foots the bills.

  2. GotCollateral says:

    Tax payers are only on the hook as long as they are willing to continue to pay taxes to support the cash-flow needed for this malfeasance…

    Less and less tax payers can happen… people leave states… people leave countries ;)

    • No Expert says:

      To an extent but wouldn’t countries implement capital controls (like China)

      • GotCollateral says:

        Because people don’t skirt capital controls all the time… even in china…

      • hendrik1730 says:

        Capital controls are in the making, everywhere. We get moire and more questions as to the origin of dunds and their destination. Concerning the origins, I have no problems, that’s fair enough – I am not into the dark or criminal circuit – but as to the destination : that’s MY business.

    • Stephen C says:

      Would love to know the details on how a U.S. citizen can just pick up and leave the country, that is, with his wealth.

      • rankinfile says:

        Form an LLC and buy foreign assets.You may set up bank acct. in said country under company name.I suggest New Zealand.

      • lenert says:

        If you have to ask, you likely can’t afford it. Especially now with only a US passport.

      • Anthony A. says:

        Even Nigerian princes have trouble doing this. LOL!

      • Old School says:

        Been retired for a long time now and have got to travel a lot in NC and TN. There are still a lot of safe places you can get off the hampster wheel and have good life for very little money if that’s what you want to do. I looked back at my records and lived five years on $75,000 total and had a great time. I can spend more now, but the incremental happiness isn’t much.

    • IdahoPotato says:

      If you ae an American citizen, you will be taxed on all income no matter where you live.

      • GotCollateral says:

        Income… not wealth… and both can be obfuscated as we have seen from panama papers… and all those orgs still running… gets cheaper and cheaper everyday… ;)

      • Lee says:

        Yeah, and you’ll have all sorts of forms to fill out and other rules to follow.

        You’ll also find that there are lots of businesses that will not open an account for you if you are a US citizen.

  3. Paulo says:

    Great article. Our version of the ‘land rush’ is pretty apparent on Vancouver Island. Many people are rushing out to buy properties, both rural and in town. At the same time, for many folks, this year is the worst year of their lives and they might lose everything. Everything.

    I suppose both the good and bad will eventually balance out, but in our house we are ever mindful of luck vrs loss.

    I would like to add that most western countries are wealthy enough to help those on the losing end to get by and be safe. The lucky and wealthy will and should be assessed some of the bill going forward. I include our family in this statement. Deciding what to include in this support will be tricky. Certainly no one should be out on the street. Maybe the lenders should have never lent to the sub prime borrowers in the first place, and maybe some dodgy borrowers should have been more sensible in their choices. It’s kind of like cancer and smoking. Sure, everyone now knows people were stupid to smoke. However, the tobacco companies still had to pay out on the lawsuits and hospitals had to treat cancer patients with or without insurance. Sub prime owners should not lose everything. There must be middle ground, somewhere.

    • Bobber says:

      Yet, it is the untimely death of smokers that convinces others not to smoke.

      Pain serves a purpose, but only if people suffer the consequences of their own actions. In this crazy world the Fed has created, however, your speculative failures are somebody else’s problem.

      • Old School says:

        Exactly. I think 90% of economics is understanding the importance of price and incentives. All the PhD formulas are mostly hocus pocus. People say the Soviet Union had some of the best minds on the central planning committee, but they didn’t grasp what was important.

    • MCH says:

      The biggest thing is that there are lending standards for a reason. Subprime was done out of good intention, but ultimately the execution was by a bunch of shady guys who then offloaded all of their risks.

      And the guys who received subprime loans are usually the least educated and are more likely not to understand what they are signing up for.

      In the US, once again it is about the poor state of US education where teachers unions are more concerned about social justice than realizing that they contribute to a large part of the problem because they do not properly educate kids.

      Because nothing is easier than popping in a video to kill half an hour instead of actually teaching something useful, like how to balance your budget.

      • flashlight joe says:

        “Subprime was done out of good intention,”

        I don’t think so. How many times does the central bank have to inflate and crash the economy before you catch on? It’s a racket. We’re the marks.

      • rankinfile says:

        Teachers unions top priority are pensions and Cadillac health insurance w/tiny deductibles.

        • MCH says:

          Well, can’t argue with that, because if the union doesn’t do a good job there, then they’d be done.

      • Paul from NC says:

        I have no doubt, depending on where you look and which district you poke under, these are things that may have transpired and apply.
        I am an uneducated millennial (uneducated by the modern interpretation of the word, that is, formally), so please let me share my counter-experience to what may very well be the norm.
        Freshman year (1997) of highschool, first semester, every incoming freshman had to attend a mandatory personal finance education class. In fact, we were specifically taught about how to balance a check book, how and why to open savings and checking accounts, considerations regarding getting a new line of credit, and job opportunities with realistic models of income and expenditure for our age groups. This was not some “quality” school as I was later reassured by folks who apparently *did* attend a quality school. A small poor high school in rural Kenosha county, graduating class size less than 230.

        In 2004, I applied, with my then girlfriend, now wife, for our first FHA loan for our first home. We put around 0% down on a $120K loan, as we had nothing. Together we were bringing in about $28K a year. The mortgage brokers were very sweet folks, who were *very* hesitant to even present us with the application, until after having smirked among themselves (I think they got a real kick out of us) and presented us with all of the numbers projected 30 years out, and current recommendations for income vs. cost of housing/living expenses, as well as introducing the likelihood that we would not only *not* get married, but could in fact, likely break up within a couple of years. It was pretty amazing how hard they worked *not* to get us the loan. I’m not sure if this was typical at that time. Well, the house is now paid off, and we’ve been married 15 years. Obviously, the crash hurt; we lived check to check and that did not change until about 8 years ago. The location the house is in, is considered “nice” by my older family members, and considered “the ghetto” by my younger family members (and apparently the larger market). An observation I find interesting.
        The house is still worth 120K, with foreclosures left and right on my block. It is now our rental property. An educated millennial, bringing in far more than 22K a year as I was, could buy a small house sufficient for a single-lifestyle (no kids in plans) on my block for about 50K-68K currently (one 800 sq ft. house sold for 39K about 600 ft. from mine a year ago), pay it off in 5 years or less, and save or invest a large enough sum of money to move out of “the ghetto” and keep renting the original home, potentially retiring early depending on lifestyle. Had I had to do it all again, and know then what I know now, this would be my plan. Good luck to the new home owners. May they grow and learn as they go, like we had to.

        • Candyman says:

          Congratulations to you and yours for a hard job well done!

        • DinoBingham says:

          Very good story thank you for sharing…. I am old retired and under educated. I sold my rental myself as is where is, our family owned since 1982. No realtor, no commissions, no closing fee no fix up fees or title fees all passed on to the buyer. I carried the loan with 10% down and @5% interest for one year. They refi in one year and paid their private loan off with me. All I did was educate myself by watching online realtors, then I hire a real estate lawyer to help me fill out the proper paperwork, everything was done digitally, the only in person meeting was signing off at the title company I saved lots of $.
          Next years capital gains will be interesting. I took the chance and did not reinvest in real estate knowing the bust was coming, the loss would be a wash and I’d have better choices once the crash happens. Short version, I work daily on a wing and a prayer. Mrs.Dino B

      • Old School says:

        Stockman taught me the economy now grows on debt not income, so I think that is why you see Congress and the Fed take over debt markets like education, housing now purchases of corporate bonds. Debt has been the fuel for a long time now.

        Seems like Keynesian types are trained not to worry about the end game. I suppose it’s a soft default like Roosevelt confiscating gold or Nixon unchaining currency from gold. Don’t think Zirp is going to get it done. I think central bankers like the fast over the weekend smash and grab and then promise you that it’s all over and there will be no more pain to get the confidence back. That may not happen, but they have pondered it as a solution.

  4. MCH says:

    If I look at the chart, I think the most important column is the last one because it provides a better overview of what is happening in a region. But I am curious about the number, FHA loans in the Silicon Valley is 4497 with a 19% delinquency rate, but is a little over 2.3% of the loans in the valley.

    Is that the right way to read this, this implies the valley has something like under 200k active mortgages total?

    This seems a bit low.

    • Wolf Richter says:

      There are loan limits for FHA mortgages, and the typical home in Silicon Valley is way above that limit. That explains a big part of it.

      • Ghassan says:

        MCH
        I don’t think Wolf understood your question. Your calculation seem correct. I think around 650 thousand households reside there, that means less then third have a mortgage.

        • MCH says:

          Which is pretty interesting in and of itself. I would have guessed slightly more than a third.

          I wonder how that lines up with some other regions. Wolf does have a lot of useful information here for just rough comparative purposes.

          May I ask where did you find the 650K number for the valley?

        • Ghassan says:

          MCH

          It seems that I can’t reply to your last comment so I just wright it here; I found the data at census reporter. Org (no space in the middle of course).

          You could try and compare other metros by using wolf’s and this websites data.

        • MCH says:

          Thanks Ghassan, useful to know.

      • Tony22 says:

        On scrolling the list, it strikes me as odd that #16, San Rafael, 20 minutes north of San Francisco, a large town of 58,440 residents within Marin County, Population 252,000, gets its own MSA, compared to Riverside-San Bernardino-Ontario MSA, #67, an enormous southern California area containing millions of people.

        https://en.wikipedia.org/wiki/Marin_County,_California

        Is it because San Rafael contains a focused pocket of poverty, with special encouragements for FHA loans? Is it more likely that these mortgages will default? Based on demographics, San Rafael concentrates most of Marin County’s 16% Hispanic population. There are 18,055 Hispanics living in San Rafael, 26.13% who live in poverty, contrasted with 6.74% who live in poverty.

        Is that way it is its own MSA?

        https://worldpopulationreview.com/us-cities/san-rafael-ca-population#poverty

  5. Hernando says:

    What does the crystal ball say? What is the take?

  6. DR DOOM says:

    Default and repeat. If MMT works what does default matter. No difference structurally within a economy. We just owe it to our-selves so what’s the problem. Same for taxes. What does it matter ? Default and repeat.Same argument for deficits . Print it. We need a faster way to default. An on-line de-fault service ran by Amazon. You should be able to get rid of a car loan and a mortgage at the same time. That way you can spend your time shopping on line for replacements because that’s what our economy is all about, being on line . Stupid Exxon Mobile only clothes you ,feeds you, cools you and warms you . And just for kicks moves you. Sales Force however provides cloud services that’s what you want when you churn the defaults on line. Money Printer goes Brrrrrrrrr……… Is the first perpetual motion device and it’s a dandy.

    • Winston says:

      “We just owe it to our-selves so what’s the problem.”

      Interest payments as a proportion of tax receipts.

      • Tony22 says:

        If the economy stops growing and if interest rates compound annually, and debts are not paid off, doesn’t that mean that eventually interest, paid back with real labor, or selling what the debtor has left–if there’s still a market for it, that those interest payments will absorb most of the economy?

      • Old School says:

        I think Stockman’s analogy of a market economy working like a mechanical watch is a pretty good analogy. It can squeak out productivity gains of 2% or 3% a year until you get politicians and central bankers taking the back off and start trying to tune it up. You don’t have to tinker much til your productivity flatlines or turns negative.

    • nick kelly says:

      I like yr sarc but since you mention perpetual motion device…may I add that the US Pat Office will not examine apps for them (there have been lots) on the grounds that they ‘violate fundamental laws of physics’

      And the idea that the printer can create wealth violates fundamental laws of economics, which at its core is about the production of useful goods and services, the pieces of paper being only to facilitate their exchange by overcoming the inefficiencies of barter.

      Any other application constitutes fraud.

      • VintageVNvet says:

        No such thing as ”fundamental laws of economics” NK,,, just as has been shown over and over again and now once more with the current state of affairs in our economies, both main street and the walled street.
        Hope you can get used to the fact that the only fundamental ”social” laws are that of greed and evolution of the most adaptable; and even those are just temporary until the musk ox comes up with and perfects his brain implants to make us all ready, willing, and able to evolve to martians.

        • Tony22 says:

          What’s the difference between an economist and a tarot card reader or an astrologer?

          The card reader and the astrologer cannot get cabinet positions nor can they obtain court orders to seize your property.

  7. TownNorth says:

    So the dam won’t burst (the sudden surge of supply of homes for sale) until the CARES 6 months + 6 months is up + another 90 days to get to foreclosure status? That would be June 2021?

    In Housing Bust 1, the banks did not live up to federal requirements to modify mortgages. I wonder if that will be the case this time around re extending. And remember MERS?

  8. Dan says:

    Whatever happens, will happen to late to save many of these people. Not because we can’t help them, but I’m convinced because the system is set up to fail them. So Wall Street can again capitalize on misery.

    • Petunia says:

      The system is about keeping everybody in debt. Even when you lose your home you are still in substantial debt with all the fees and taxes attached to the process. The middlemen all get paid over and over, that’s the system.

      If you manage to payoff your house and go into retirement, Medicare is there to finish you off. The average worker bee will never be able to pass on anything to their children, that’s the purpose of all the fraud.

      • Paulo says:

        I agree with Petunia’s comment very much, and that is not always the case:-) I think she hit it right on the head. Sounding the alarm at the risk of looking like a conspiracy nut to the kool-aid debt drinkers is the least we can do.

        These GD low interest rates are lulling so many into taking on debt, and more debt. My friend is a good example. I asked him a few months ago why he did not pay off his mortgage and he insisted his 3% mortgage vrs his 7% investment return made the question obvious….kind of duh. Then in our next phone call he told me he just lost 15K he invested and the next week another 35K….on Market gyrations.

        Yes, savers are getting hosed. I am a saver and getting hosed, but I still have my money and will be able to use that money when prices decline. I believe they will, and if they don’t I can still sleep nights. Meanwhile, on Monday I am putting a new roof on my shop. For the first time in my life I am hiring a younger man to do the 2nd story work as I no longer feel confident with height. The materials are paid for and I have his pay sitting in an envelope on my desk. Cash.

        When Petunia summed up the fraud she covered everything for older workers. And for the kids they will also assume crazy student loans, stagnant wages, and decreasing prospects.

        • gorbachev says:

          Just had my rental roof bungalow done.A couple

          of young men with good legs and balance got

          the job done in two days.

        • Turtle says:

          Well said. It’s amazing how excited people are about home buying right now. Unemployment is higher than at any point during the Great Recession. Home prices are far above mean price trend line. Forbearance will end. Cash is where a home buyer will want to be when reality hits. Yet, I see people getting drunk on tech stocks instead. Gambling and debt abound.

      • Anthony A. says:

        Personal bankruptcy works wonders when you are so far over your head you are drowning. A few years later, you can start the debt ball rolling again!

        (love those credit cards!)

      • Old School says:

        I agree with a lot of that. One problem we have as individuals is we are consumers by nature til we die. It’s a complex challenge as we could die tomorrow or live to 105 and the govt is always monkeying around with the carrots and sticks.

        If you are a stem type personality you can probably work out a plan for income, consumption and investment because it’s similar to problems you have had to solve in your work life. For most others the problem is too tough, so they either go through life over consuming with debt or live in fear that they are spending too much.

  9. Matt says:

    What’s the normal average pre-covid?

    • Wolf Richter says:

      Matt,

      FHA delinquency rate in Q2 2019: 5.1%.

      In July 2020: 17% and rising.

      • nick kelly says:

        Good God! That pre -covid 9.2% is one hell of a rate and even if only a fraction go to foreclosure it would bury anything remotely like a business, even a govt hybrid. Just servicing that much delinquency would be a nightmare.

        The Canadian govt insurer CMHC rate for last quarter 2019 was less than 1 percent at .29 %

        I thought after the 2008 US mortgage fraud thing (Country Wide etc.) that things had returned to normalish.

        The banks up here are scared of running afoul of CMHC. I’ve been told by a bank manager that if it thinks the bank is sugar coating the apps too much, it can refuse all apps. Since this has never happened, it’s just a threat but the threat of a death penalty.

        Related: the retiring head of CMHC and several realtors and their association got into a recent pissing match, with CMHC guy warning against idea prices only go up as he tightened qualifying.
        Some of their back and forth on Twitter etc. can be read on Mortimer’s Twitter feed about Van RE.

        9.2? I still wonder if that is a misprint.

        • td says:

          In most of the US, it’s possible to walk away from the mortgage with the liability contained within the foreclosure. Nearly all mortgages in Canada are the personal liability of the mortgagee and walking away is pointless.

          In the last financial crisis, defaults in Canada were so much lower than in the US that the whole crisis amounted to something like a 10% price correction and there was no mass default. The Bank of Canada bought $69 Billion in 6.5% mortgage paper and forced the banking oligopoly to lend it all out at 4.5%. Being in Canada, the paper averaged about three years in term and the whole shebang rolled off in a few years at a profit to the Bank of Canada.

        • nick kelly says:

          You make a good point TD but overdone a bit. There was no RE crash in Canada in GFC so few were underwater. But having been a realtor and owner in the early 80’s when we had one hell of a crash, many people walked and although it went on their credit file, suing was almost unheard of because it was pointless .

          One exception to the usual law then was in Alberta, where if a guy assumed yr mortgage you were completely off the hook.
          As prices crashed this led to the ‘dollar dealer’ phenom.
          The guy would assume yr mortgage, you would walk and he would live there free or collect rent for 6 months.

          This busted the big private sector competitor to CMHC where 90 % of its foreclosures were in Alta.

        • td says:

          Nick Kelly, you’re definitely right about the 1980’s crash. After that, most people getting mortgages in Alberta had to assume full personal liability in the mortgage contract even if the province didn’t require it. My main point is that jingle mail usually only happens in Canada when someone is busted completely.

        • Wolf Richter says:

          nick kelly

          yes, it was a “misprint” by me (now fixed). It was 5.1%. There is one difference though between the two years: July delinquency rate of 17% includes mortgages that were delinquent but then have been moved in forbearance, and lenders might not label them as “delinquent” anymore.

  10. Seneca’s Cliff says:

    Not sure how to explain that all the major MSA’s in Oregon are near the bottom of the list. It is either that we have had better success with Covid-19 than most other states, or Krugman’s broken widow economic theory is true and the protestors have become an economic engine keeping people employed and their home loans out of purgatory.

  11. Yushan says:

    I remember that in 2007, about a year before the Lehman crash, I emptied my bankaccounts because I thought is was becoming too risky to keep my money there. And I was right, the whole thing collapsed about a year later (although savers didn’t lose eventually).

    But I was so happy the long expected “reset” finally happened (so I thought)! So I was really optimistic in 2008. At that time the system still looked repairable if the right decisions were made and the people in charge would – after two massive bubbles within a decade that ended in tears- certainly not repeat the same mistakes again in my lifetime!

    How naive I was… I feel like I have been living in a parallel universe for the past 12 years where everything is upside down and it just wont stop. It gets crazier every year and there is really nowhere to hide anymore.

    • Petunia says:

      The difference this time is the problem is not contained to the hot real estate areas of the country, like last time. This time it is all over the country. This could be the reason this time might be different because now everybody will be pissed off, not just a few like me.

      Rent control is coming. Don’t be surprised to see it come out of these FHA defaulted homes. They all may become govt housing. Then there will be no NIMBY grumbling.

    • Old School says:

      As one money manager just said things don’t usually work out too well in the long term when say fundamentals don’t matter. That’s where we are with a lot of asset values.

  12. pchap says:

    Very interesting article. Do you think that they will let this market fail slowly or all at once?
    From Michelle Bowman’s speech a couple of days ago:
    “It remains possible that the economic challenges will persist beyond the forbearance time period provided in the CARES Act, and if so, we would almost certainly see some of these loans transition into longer-term delinquency status or enter into renewed deferment periods. ”

    https://www.federalreserve.gov/newsevents/speech/bowman20200826a.htm

  13. Brant Lee says:

    I don’t know what anyone expects or why they are surprised when mortgages are issued at credit scores of 620, 580? As most people in business know, those scores are trouble and it’s not going to end well. Yeah, yeah some people fell into hardship and all of a sudden lost their good rating, but all that information is available on a credit report.

    620/580, sub 700 tells me these people just walk when the going gets tough and don’t mind if someone else gets hurt. It’s the first thing I look at when hiring a contractor or renting out. A credit report tells me all I need to know. Now subprime is a major industry in the U.S. and we’re wondering where things went wrong?

  14. Crush the Peasants! says:

    Surely Tishman Speyer and Blackrock must have been unable to borrow after their massive $5.5 billion Stuyvesant Town Peter Cooper Village loan default. Surely.

  15. tom10 says:

    ….some sort of land rush.

    Classic!

  16. Max Power says:

    Right now, from personal experience:

    -Houses are flying off the shelves, with most selling quickly and above asking prices.

    -Landlords receiving many unsolicited offers to sell.

    Like everything associated with the pandemic, it’s very difficult to say how long this situation will last and what comes next.

    • The Bob who cried Wolf says:

      Yup, latest gimmick is to use a street view photo and put it on the envelope and ask “is this your house?” to get you to open the mail. Robopens writing your name to make it look like the nice family wants to buy your place. Presorted standard mail gets opened via ripping in half at my house. So much junk mail.
      The signs saying we buy houses are all over the place again.
      Looking an awful lot like 2006/7 all over again, but unlike last time where it popped in 2008, I think this will go on a lot longer primarily due to the fact that there simply isn’t any inventory, at least where people want to live.

      • Max Power says:

        In Florida they troll county property appraiser and/or tax collector records. To zero in on landlords, I suspect they are looking for records which don’t have a homestead exemption. Besides mailings they even send out unsolicited text messages asking if you want to sell.

      • jon says:

        Actually in 2005 2006 the inventory was super low and there was a lottery system to sell homes as the buyers were too many

        This was in San diego

        • The Bob who cried Wolf says:

          Agreed, inventory was low, but I think it was only low relative to how many buyers there were. Back then there was a stupid amount of buyers as everyone and his uncle was buying. Strippers, waiters, etc all buying so the pool was artificially higher. As I recall peak sales in San Diego was in 2005 and peak price was in 2006. In 2005 4S, Otay, various billy goat lots, anything that could hold a stick, etc was being built on.
          That being said, there are a lot of comparisons of what happened back then to what’s about to happen now. Personally, I think the chasm between the haves and have nots is going to grow exponentially this time.

    • Winston says:

      Considering that the possibility of reinfection with the CCP virus only months after recovering from it is now confirmed and that there has NEVER been a successful human coronavirus vaccine developed, not for SARS, not for MERS, not for the common cold, I don’t expect this to end anytime soon.

      • Max Power says:

        I wouldn’t necessarily say so. While there have been some reinfections, it has involved just a handful of confirmed cases worldwide out of millions of infections.

        It might also be that a seasonal rather than a one-time inoculation may be required.

        • Winston says:

          “it has involved just a handful of confirmed cases worldwide out of millions of infections”

          I suspect that’s a case of not looking for this intensively just like the inane bragging in the US about not being affected much by the virus based upon the very few cases being caught due to highly restrictive and extremely limited testing. You can’t find what you aren’t looking for.

          To confirm actual reinfection, the virus involved in the reinfection needs to be checked via genetic analysis to compare it with the strain involved in the initial infection to make certain the second infection is not simply a case of the first infection never really going away. The genetic structure of the first infection needs to be known to do that. How often do you think that expensive process is actually accomplished in millions of infections outside of a specific study?

        • Winston says:

          Plus, there are the long-haulers:

          MIT Technology Review
          Covid-19 “long haulers” are organizing online to study themselves
          Slack groups and social media are connecting people who’ve never fully recovered from coronavirus to collect data on their condition.
          August 12, 2020

          https://www.technologyreview.com/2020/08/12/1006602/covid-19-long-haulers-are-organizing-online-to-study-themselves/

  17. Fat Chewer. says:

    So many concepts spinning in the vortex of the last twelve months. QE to infinity, too big to fail, supporting employment in the face of a pandemic, allowing inflation to rise, repos, ZIRP, NIRP, RE bubbles and everything bubbles, land rushes, delinquencies and defaults, zombie companies, massive unemployment, massive government fiscal support in the trillions, riots, disasters, the worst financial conditions since the Depression, entire industries dying, bonds only worth owning if you are prepared to lose money on them and of course, a roaring stock market powered by only a handful of companies and irrational exuberance. I have only just scratched the surface. It’s all too much. Something has to give. Mr Powell is allowing inflation to rise. Many here would say that is no surprise considering how much money has been printed. I go “Brrrrr” as I feel a cold chill go down my spine.

    • Old School says:

      I try to key off of Buffet although he is not perfect. It seems like he doesn’t think we have enough clarity on the virus and the affects thereof to really go in big. He didn’t do much in March at the lows even with all his cash yielding near zero.

  18. Boomer says:

    The hedge funds must be salivating. They can snap up the foreclosures for pennies on the dollar with Chair Powell’s free money. Then they will rent your place back to you in the big city after you provide an official certificate of vaccination.

    • Wolf Richter says:

      Not yet. Home prices would need to dive first before that equation works. But you’re right, there are funds being set up now to enter the field when home prices have dropped far enough and they can buy cheaply out of foreclosure. But not yet.

  19. IanCad says:

    Was kind of kicking myself for not snapping up several lots in Cobb CA. – About two months of remorse over missing out on several bargains. Other Scotsmen will understand.
    Feeling much better now thank you Wolf. The laws of supply and demand do not operate on our schedules.

  20. jimmy says:

    Peter Schiff, who has correctly predicted all the fraud and theft caused by the CARES and PPP acts, thinks that people are now abandoning ‘their’ city property and taking out a new mortgage to buy a house. Once you get approved on the house loan, you can default on your city condo. Makes sense. Is this time any different?

    • Anthony A. says:

      Jimmy, I suppose they can do that if they meet the lending requirements and fully disclose the mortgage on the home they own. Banks would want to know why you are buying a home and still have the old one.

  21. Paulo says:

    It’s not what you can afford (or barely afford) when you are working, it’s what you can afford when you are not working. So said my late customer and friend “Art, the barge loader” to a young home buyer with big payments. I sat at the lunch table and listened.

    If you’ve seen a few ups and downs in your working life, and you have a brain cell or two, you eventually understand the good times aren’t always good and they don’t always get better. A little caution is a survival strategy.

    Good luck on that “lets just go back to work” thing. This is going to be a very very ugly fall and winter. (I did assume you were being sarcastic).

    Canada had 427 new cases, yesterday, and 8 deaths. US had close to 1,000 deaths. If we extrapolate for population Canada would have 65 deaths. This indicates the US has over 15X the per capita death rate than Canada. In other words, pretty much the worst numbers in the world. That is what denial and lack of a coherent plan accomplishes. But as long as there is college football……

    • Chillbro says:

      Most people crawl out of a woman broke as church mouse ie they can afford nothing if they don’t work. That’s what they call living pay check to check. Vast majority of younger generation never had the opportunity to accumulate any saving or assets. Under your logic these people people should be homeless because that’s what they can afford when they are not working.

    • td says:

      One minor correction: the US has about nine times the population of Canada so that would extrapolate to 110 deaths vs the actual 8.

      Canada 2020 est: 37.9 million
      US 2019 est: 328 million

      • Anthony A. says:

        Details, details,…..

      • Wisdom Seeker says:

        Population density matters, and in Canada that is generally much lower than in the harder-hit parts of the U.S. which account for most of the cases.

        Canada’s doing a good job but they have a natural advantage there.

    • MiTurn says:

      “I did assume you were being sarcastic.”

      Snarky, yes, but a kernel of truth. It seems the western world, among others, have rolled the dice and are banking on a vaccine. As many commenters on WS have stated, there very well may not ever be a vaccine. If so, let’s revisit the Swedish approach, protect the elderly, and move on.

      Otherwise we’ll break the economy and relive the Great Depression, probably combined with resentful social unrest.

  22. Island teal says:

    We have not seen the the real layoffs yet. The PPP money is still being used to prop up businesses. Think beyond the first couple of levels of the Supply Chains to see what gets hit next. All of the services not needed when schools and offices do not reopen. Eventually even the sacred public sector may have to face the economic reality.

    • Winston says:

      “Eventually even the sacred public sector may have to face the economic reality.”

      When tax receipts dry up thanks to the other effects you mention.

    • ru82 says:

      There were a lot of phony businesses created for PPP money. That also helped durable good purchases the past few months.

  23. Jdog says:

    The stupidity of this entire issue is unbelievable. There should be no such thing a taxpayer funded subprime mortgages. Why the hell are we rewarding people who do not pay their bills by subsidizing mortgages for them? Our country is drowning in moral hazard as the socialists push rewards for the least deserving of our society. If you are going to subsidize something it should be responsible behavior not irresponsible behavior. Bad credit scores are not the result of being underprivileged, it is the result of being irresponsible and poor ethics.

    • Just Some Random Guy says:

      Literally every govt program in existence rewards bad behavior and punishes good behavior.

      • VintageVNvet says:

        The GI Bill for instance jr?
        What about the Works Progress Administration?
        How about TVA? Did you know approx half the houses in USA lacked electricity in something like 1950?
        What about the various highway patrol enforcement of driving laws?
        And what about the national highway and interstate construction programs, and the state and local programs as well?
        What do you think about building code enforcement programs?
        C’mon jr, you can do better than that.

    • KurtZ says:

      Jdog, seriously, did you miss the 21st century?

      Who are these socialists you are refering to? Irresponsible and poor ethics? Credit scores as a moral compass? All this stuff went out the window when all the banks and hedge funds have gotten bailed out by the Fed multiple times this century.

      Moral compass, for a ruling class devoid of them, is for peons.

      Dont spend too much time blaming us victims of the Fed.

      • Jdog says:

        Every problem has a root cause, and unless the root cause is identified and corrected, all the problems stemming from the root cause will persist. These socialists I refer to are anyone who uses force to impose their will on others. In any society, it is the people who set the standards for morality, and those standards determine their leaders and their system.
        If your system and your leaders are corrupt the blame for that ultimately rests with the people. The most totalitarian dictatorship in the world can only exist so long as its people are willing to accept it. At the point where the people are willing to stand and oppose, no government can stop them.
        You blame the Fed, and yet, what the Fed does is loan money, in order to loan money, someone has to borrow it. They can make all the money in the world available but if no one borrows it, it is irrelevant.

        • nick kelly says:

          Why is the US govt mortgage insurer having 15 times the delinquency rate of the Canadian govt insurer?

        • cb says:

          @ Jdog –

          1. Have you considered that it might be the Leaders who set the standard for morality, at least “at large.” Some get ahead by learning how to lie truthfully and steal legally.

          2. The FED does much more than loan money. They create money. The FED manipulates the entire financial system, picks winners and losers, rewards insiders through the Cantillion and other effects, suppresses savers, etc.

    • Max Power says:

      They’re not funded by the taxpayer, they are guaranteed by them.

    • BuySome says:

      In a vacuum that makes sense. But try this…Subject A works for herself. She saves cash and metals and has not used any credit cards for the last thirty years…so she never checks her credit score and couldn’t give a FF about that system. Subject B has a big house all mortgaged up, a government job with high pay and excess promises of retirement benefits that the public will probably get stuck for. She has lots of credit cards and a wonderful score. And her job involves forcing everyone else to go into the cash-free e-money system because some corporate big shots told politicians they must do this. So her real job is to destroy everything Subject A has accomplished, because if the economy tanks and you deduct the overall debt from the real assets, A is slightly richer than B. Who the hell is your irresponsible party there?!!

    • Old School says:

      It’s incentivized economic activity that’s good for realtors, bankers, appraisers home inspectors and the borrower. For taxpayers not so much.

  24. Just Some Random Guy says:

    Govt: You don’t have to pay anymore
    Americans: Cool. We won’t pay anymore.

    • Tony22 says:

      Oh, and since we have no national healthcare, you didn’t prevent the pandemic, we are losing wars around the world and you are stealing from our children with inflation, we are not going to pay any more taxes.

      I mean, what exactly are we getting for our tax money?

  25. Bobby Dents says:

    Lets note the private sector started the lockdown in midmarch. August 31st, the 2nd, noneconomic phase begins, as work from home orders end. The I-95 corridors begin normalizing traffic flow.

    Vaccine or no vaccine, the damage will last awhile. CRE will take years to get healthy. RE will mini crash next year(actually, due to dropping originations, probably by the 4th quarter). A public investment boom and rising oil prices may though, be a teachable moment. Coastal RE is overrated in general. Libertarians live credit markets and purity monetary policy way too much. Pure investment really is the nationalism of building capital stock and no, the private sector is not always efficient.

  26. Twilight says:

    In late 2006 and 2007 well before the free-fall in prices in 2008 we saw a huge rise in for sale inventory. They also built waaaay more houses 2002-2007 then they have 2008-2020. Right now for sale inventory is REALLY low in most of the US. Banks will also do loan mods, sell the notes behind the scenes, principle reductions, etc… (all things they learned last go around). Also, although there are some low down payment FHA loans out there, it is NOTHING like 2002-2007 with all the “no income doc” 100% loans.

    There may be some more properties come on the market at some point next year, but I do not see a big downside on prices any time soon.

  27. Lee says:

    Looks like more pain in Hawai’t with another huge lock down implemented – this time for another two weeks.

    Maybe the reason the mortgage default Hawai’i numbers are not as big as expected in the high average and median prices of houses and condos there.

    It looks like the state of Hawai’i government despite all the advantages of being an island to govern has also fallen down on the job in controlling the virus.

    More pain ahead for that place in health and economics.

    • Lee says:

      “Only 22,562 visitors flew to Hawaii in July, which last year was Hawaii’s best tourism month.

      That’s a 98% drop from the 995,210 visitors who came in July 2019, according to preliminary statistics released by the Hawaii Tourism Authority on Thursday. Overall, visitor arrivals to Hawaii in the first seven months of the year plummeted about 65%.”

      What do you do when you lose 98% of your customers?

    • Old School says:

      I think this is going to be a big macro problem. We are going to come out of this with a lot more debt serviced by a smaller economy. Stock market is going to be wrong (I think) and long term treasury market is going to be right. Sluggish economy as far out as eye can see.

  28. Lisa_Hooker says:

    My neighbor, who lived rent free from 2009 to 2013 because the foreclosing bank wanted the home occupied, is looking forward to at least another 2-3 years of free housing. 6-7 years of free rent out of 15 is a good deal. Meanwhile, I’ve never been tardy on a mortgage in 27 years. I just won’t play this game.

    • Twilight says:

      Lisa, I agree, people will get free rides again. The US Gov’t doesn’t want anyone or any company to ever experience any financial pain anymore (despite their poor decisions). So FHA, Fannie, Freddie will not foreclose on anyone. They will let they sit in house mortgage free for years, reduce their principle, modify their loans, anything but foreclosure. It worked last time and it re-inflated the market. This is why I don’t see prices falling much or many distressed deals.

      • SuzeB says:

        The joke is really on us renters/savers. Sad!

        • Old School says:

          The government and Fed is giving you carrots to consume and sticks if you save. Don’t let them get you to risk what you need to live. Buying at this point in the cycle you better be thinking it could be ten years before I can sell this at a profit.

  29. Fat Chewer. says:

    Move ’em on, head ’em up
    Head ’em up, move ’em on
    Move ’em on, head ’em up, rawhide
    Cut ’em out, ride ’em in
    Ride ’em in, cut ’em out
    Cut ’em out, ride ’em in, rawhide

    Keep movin’, movin’, movin’
    Though they’re disapprovin’
    Keep them dogies movin’, rawhide
    Don’t try to understand ’em
    Just rope ’em, throw, and brand ’em
    Soon we’ll be livin’ high and wide

    • Jdog says:

      Soon after man learned he could domesticate livestock, he learned to turn his fellow man into livestock……

  30. tom20 says:

    This “new” economy is great for our business.
    This work from home, school from home, shop from home, college from home,ability to defend your home, has us swamped with work.
    Some want isolation, some want freedom, more than a few want to be able to do family life on a reduced, or single income.

    Crazy times. I just tell them its fly over country. If your moving into a moby, its mandatory to park a $85K truck in the front yard.

    • Jdog says:

      In order to facilitate the population explosion, it was necessary to develop a system where people basically only worked, and stayed home the rest of the time. It appears they have improved on that…

      • tom15 says:

        Is this allowed, or is this a violation of the social spacing ?
        Maybe its ok if you keep a mask & face shield on??

    • Old School says:

      Maybe work from home is

      1) Cause deflation because costs are lower

      2) Jumble things up with winners and losers but cause capital destruction in some real estate, air lines.

  31. GotCollateral says:

    Rental prices are in free fall in the high-middle end apts in jakarta this month. I just signed a lease, havent even moved yet, but i might break it to take advantage of any deals lol

  32. gkc says:

    How can personal income – including transfer payments from gov spike to record highs and at the same time mortgage delinquencies also spike to record highs? If people have more spending money, why aren’t they paying their mortgage?

    Is it b/c they don’t have to per gov suspension?

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