By Mike Bodeen · 12 June 2017
October 2010 was the peak of the horrific mortgage meltdown leading to the worst real estate market in Phoenix Metro history. Foreclosures, where folks lost their homes and had to move out, averaged 164 PER DAY. In June of 2017, foreclosures are averaging 6 per day! (See Chart Below)
Some of us (not many anymore) remember the dark times of the early 80’s when extreme high interest rates for mortgages was 17%-18%. As some might recall, these exorbitant rates for 30 year fixed mortgages occurred because of huge inflation which was brought on by the energy (oil) crisis. If it were not for “assumable” mortgages combined with owner carrybacks of second mortgages, the market back then would have totally collapsed. Fortunately, we overcame that disaster.
The latest mortgage disaster occurred exactly opposite the early 80’s reason — a result of mortgages being too plentiful to many who did not qualify for the loan, but got one anyway. The spike in values due in large part to the ease of mortgage credit plus corruption / fraud within our national banking system combined for the perfect storm of seeing millions of homeowners lose their homes to foreclosure and short sales. This also was the precipice of what could have been a banking collapse worse than it was. Government intervention helped prevent a disaster. Without getting overly political here, government also had failed in their oversight of the banking system, which allowed the problem in the first place. Both sides of the aisle failed us on this one.
How healthy is our current market? Could there be a return to a mortgage debacle? In the next few weeks, we’ll look at the Phoenix Metro market specifically and ask some local industry experts their opinion. For now, the good news is that the rate of home foreclosures is at basement level. Let’s keep it that way.