The SF Chronicle, which served as a major cheerleader for the housing bubble while it was inflating, reports “Foreclosures in Bay Area, statewide hit record highs in 3rd quarter” —
The vast majority of recent foreclosures stem from subprime loans made to people with poor credit, many of whom put no money down. After an introductory period with low interest rates, such loans often reset sharply higher, so monthly mortgage payments increase by hundreds of dollars. At the same time, home prices have stagnated or fallen, so struggling homeowners cannot refinance because they owe more than their houses are worth.
Never has a story been so predictable. This emerging crisis, which is real, was obvious for at least the past three or four years when housing prices were soaring at what anyone with even a tiny amount of economic knowledge realized was an unsustainable rate.
Now we’re seeing tales of woe from “homeowners” — a word that is ridiculous for the no-down-payment crowd — who are losing “their” homes. I feel badly for them, because it has to be a horrible experience. But they should have known, and so should their lenders, that this was a high probability.
Some solid journalism when it counted — years ago — might have prevented a part of this slow-motion mess.