Foreclosures are rising. Home prices are falling. Sales are down. What does all this mean? Here are some “megatrends” that may develop in the months ahead. For investors and homebuyers, these and other rapidly developing “megatrends” could signal opportunities.
Wall Street wizards profited handsomely from the subprime market they helped create; Wall Street gurus will profit from cleaning up the mess they spawned. Nationwide, wealthy investors are pooling their cash and circling in orbits once unheard of.
“When Jorge M. Perez, chairman and CEO of the Related Group, the nation’s leading high-rise luxury condo developer, becomes the biggest ‘vulture’ fund buyer in the downturn, what does that tell you?” questioned Jack McCabe, a real estate consultant in Deerfield Beach, Fla.
Searching for Stimulus II?
In a presidential year, Uncle Sam and politicians nationwide are rushing to unveil new and bolder schemes to unravel the foreclosure crisis. As federal, state and local government weighs in of the rising foreclosure mess, look for new plans to halt the foreclosure train wreck. Bankruptcy reform. Rate-freezes. Loan modification. Stimulus plans. Fraud legislation. So far, these efforts have yielded little results. But will the political considerations transcend economic considerations? The market will correct the problems, not the government. The solution lies in the hands of real estate investors and homebuyers.
Return of the “Jingle Mail”
Already, companies are positioning themselves to profit from the wreckage of the subprime folly. Lawyers in California — for a fee, of course — will show you how to damage your credit history for a decade or more and “walk away” from your debt. For a grand, youwalkaway.com will explain what to do. Increasingly, homeowners who put little or no money down are walking away from their homes, mailing their keys — jingle mail — to lenders who gave them toxic loans, according to the New York Times. The walkers could trigger the next domino. What ever happened to the savings account?
Banks and Builders Buckle
If 2007 was the year of the mortgage meltdown, where hundred of subprime lenders became extinct, then 2008 could shape up to be the year where banks and homebuilders buckle under the crushing strain of debt. Look for smaller regional homebuilders and lenders to fail or merge with larger national outfits. A wave of foreclosure walkers could spawn $1 trillion or more in financial losses, creating a systemic banking and builder crisis unseen in American history, warns the Economist.
Rise of the Eight-Figure Foreclosure
Only poor people lose their homes to foreclosure, right? From coast to coast, the rich — and now the ultra rich — are drowning in debt too. This week alone, two trophy properties were swept away in the foreclosure tsunami. In Palm Beach, Veronica Hearst lost her $27 million dollar mansion at the courthouse steps, according to the Palm Beach Post. And in Santa Barbara, Michael Jackson’s Neverland Ranch is slated to be auctioned on March 19, with an opening bid of about $20 million.
As we look ahead, the foreclosure crisis seems to have more headwind rather than tailwind. Look to ForeclosurePulse to keep you informed of developing foreclosure “megatrends.”