2007 Year in Review:
Subprime Explodes, Prices go Negative, and Captain Credit Crunch Enters the Sea of Housing.
2007 was a watershed year for housing. The market took a major turn during the summer but much of the cracks in the housing juggernaut were seen earlier in the year. As the media is blasting the negative news on housing it is hard to believe that only a few months ago, it was playing the housing appreciation song. You have to wonder how the Hope Now Alliance is going to play out in the next few months since we are now officially entering the stage where some of the mortgage rate freezes will show results in the real world. This year it was hard for the housing market not to impact someone you know or someone in your neighborhood, maybe even you. I am reminded by a quote by Walter Bagehot:
“You may talk of the tyranny of Nero and Tiberius; but the real tyranny is the tyranny of your next-door neighbour.”
The real mess was right in our own backyard. In this post, we will go through 2007 to recount how the housing bubble pop unfolded over the year.
January - March
In January reports were coming out that approximately $1 trillion in loans were going to reset in 2007. The numbers didn’t exactly play out as predicted but without a doubt, they had the same impact. The subprime disaster was being predicted in 2005 and without a doubt, it was already expected that 2007 would be a definite turning point for the market. It was also reported that foreclosures jumped by an astounding 40 percent statewide. I love the spin that was added to this during January. As DataQuick reports:
“While foreclosure properties tugged property values down by almost 10 percent in some areas nine years ago, the effect on today’s market is negligible, DataQuick reported.”
Yes, the effect was negligible on the market. Not only that, notice of defaults surged statewide by 145 percent. This was a crystal ball into the housing future yet you see how the media was able to put a positive spin on this. It reminds me of those Geico commercials. Your house just lost $50,000 but you just saved a lot of money on your car insurance.
All leading indicators were pointing toward a housing decline but the prices told us a very different story. Southern California was up 3.3 percent on a year over year basis and Los Angeles hit a median price of $522,000. For those of you that think we were subtle about predicting a decline in 2007, maybe this title will tell you were we stood in January of 2007:
http://www.doctorhousingbubble.com/2007-year-in-review-subprime-explodes-prices-go-negative-and-captain-credit-crunch-enters-the-sea-of-housing/
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