A Look At Alt-A and Pay Option ARM’s

Jun 12th, 2009 @ 4:18 PM by Alden Smith

If there is one thing I learned, it is that you cannot make any assumption without the proper data.  One of my favorite websites is  Doctor Housing Bubble.com.  His data is so good that I follow him on Twitter.  Although most of the data is centered around Southern California, he often shows the bigger picture.  I read his post from yesterday on his blog, where he addressed nationwide distressed property information.  I wasn’t surprised to learn that only four states make up 50% of all foreclosures and distressed properties action.

The four states are of course California, Florida, Arizona and Nevada.  Dr. Housing Bubble’ s data comes from Realtytrac, a California-based business, and is a good source of trusted data.

In the course of one year, notices of default have doubled.  Trustee sales have doubled.  Real estate owned has gone from a low of 2000 to an enormous 15,557.  In the first quarter of 2008 alone,DataQuick listed 113,676 notices of default.  The median price of California property is down 84% in the period of one year.

Dr. Housing Bubble sees no bottom in the market at the time.  He places much of the blame on Alt-A and the Pay Option ARM’s that were so popular in California at one time for the hemorrhaging in that market.  The average balance at present on an Alt-A mortgage is $442,000.  If home prices are down by 84%, it doesn’t take a mathematician to figure out that there are a lot of homeowners in deep trouble.

I find a lot of truth in what Dr. Housing Bubble has to say about foreclosures.  Foreclosures are not increasing because home prices are falling.  They are increasing because home prices were too high to begin with.  The real estate mantra telling us that it is all about location may have some merit.  Tell that to the guy that spent the last 20 years working for General Motors and is now working at Wal-Mart.  I think that gives us a much better picture.

If there is one thing I learned, it is that you cannot make any assumption without the proper data.  One of my favorite websites is  Doctor Housing Bubble.com.  His data is so good that I follow him on Twitter.  Although most of the data is centered around Southern California, he often shows the bigger picture.  I read his post from yesterday on his blog, where he addressed nationwide distressed property information.  I wasn’t surprised to learn that only four states make up 50% of all foreclosures and distressed properties action.

The four states are of course California, Florida, Arizona and Nevada.  Dr. Housing Bubble’ s data comes from Realtytrac, a California-based business, and is a good source of trusted data.

In the course of one year, notices of default have doubled.  Trustee sales have doubled.  Real estate owned has gone from a low of 2000 to an enormous 15,557.  In the first quarter of 2008 alone,DataQuick listed 113,676 notices of default.  The median price of California property is down 84% in the period of one year.

Dr. Housing Bubble seesno bottom in the market at the time.  He places much of the blame on Alt-A and the Pay Option ARM’s that were so popular in California at one time for the hemorrhaging in that market.  The average balance at present on an Alt-A mortgage is $442,000.  If home prices are down by 84%, it doesn’t take a mathematician to figure out that there are a lot of homeowners in deep trouble.

I find a lot of truth in what Dr. Housing Bubble has to say about foreclosures.  Foreclosures are not increasing because home prices are falling.  They are increasing because home prices were too high to begin with.  The real estate mantra telling us that it is all about location may have some merit.  Tell that to the guy that spent the last 20 years working for General Motors and is now working at Wal-Mart.  I think that gives us a much better picture.