Foreclosures are at an all time record high, the real estate industry is shedding agents, and the mortgage banking industry has announced plans to let more than 15,000 employees go in the coming months. Oh, and one of the largest home builders in the country reported a 27% drop in revenue in Q2 of this year, compared to Q2 2006.
Even with the grim realities we are seeing in the housing market right now, this is just the beginning.
Reuters reports that foreclosures hit a record high in Q2 2007, and worse is likely to come. 2008 and 2009 will see the largest number of adjustable mortgages adjust, all up, which will increase borrower's monthly payments significantly. Foreclosures will skyrocket:
"Where we might have suggested only one to three quarters to go, it is likely that has been extended to some degree and we will see delinquencies and foreclosure rise," said Douglas G. Duncan, [The Mortgage Bankers Association's] chief economist.
The peak of loan failures might not hit for another year or more as many borrowers face increased payments on their adjustable-rate loans, he said.
Foreclosures increased as the rate of delinquency on subprime loans, which are offered to borrowers with poor credit, rose to 14.82 percent in the second quarter, from 13.77 percent at the end of the first three months of 2007, and from 11.7 percent in the year-ago period.
Another housing bubble related trend that has the potential to impact the entire economy is the meltdown in the homebuilders industry. From an Associated Press article:
The luxury-home builder Hovnanian Enterprises reported its fourth consecutive quarterly loss on Thursday, citing continuing problems of credit availability and high inventory.
The company also said it would cut prices on homes across the country beginning late next week to try to sell off excess inventory.
After paying preferred stock dividends, the company reported a loss of $80.5 million, or $1.27 a share, for the quarter that ended July 31. This was in contrast to a profit of $74.4 million, or $1.15 a share, for the period a year ago.
To top it off, Country Wide - one of the largest mortgage bankers, and one of the worst offenders in duping customers into signing on for things they couldn't afford - announced this week that they're going to let go 10,000 to 12,000 employees around the country. Other companies in the industry have announced that they are laying off several thousand additional employees, too. These new numbers aren't reflected in the recent report that the economy shed 4,000 jobs last month:
The Labor Department reported yesterday that 4,000 jobs were lost from July to August, and the deepest cuts were in industries that are connected to the housing market, like construction and manufacturing. It was the first employment decline since 2003, when the job market was still struggling to emerge from the slump after the 2001 recession.
A recession is coming. Happy, happy.