No job, no mortgage payment. Plain and simple.

The unemployment news out of Washington on Friday was grim, although not unexpected:

Employers slashed jobs from one end of the economy to the other, pushing the unemployment rate to 6.5% -- the highest in 14 years -- and making a deep recession a virtual certainty.

The Labor Department reported today that the economy lost 240,000 jobs in October, the steepest one-month decline in a contraction that began last January.

Sometimes it's hard to put a face on figures, but this e-mail from a reader in Murrieta did it for me:

There is a new mortgage disaster on its way that no one is addressing. It's not the next resetting of ARMS. It is those who obtained 30-year fixed, low-interest mortgages based upon honestly reporting their income. I know because I am one. My daughter and I bought a house together because alone neither could afford to buy. In September she lost her job and is still unemployed. That put a strain on making mortgage payments. She is a preschool teacher. Preschools are losing enrollment as people look for ways to cutback. Thus jobs in that sector are drying up. Last week, I lost my job with a city along with nearly 200 others. The layoffs were due to a loss of tax revenue due to the recession. Other cities have frozen their hiring so my outlook is not good. Our unemployement checks would cover the mortgage, but there would be no money for food, utilities or gas to look for work. We are the tip of the iceberg of families who will be losing homes NOT due to ARMS, subprimes or buying something we could not afford. We are the families who will lose their homes due to the "trickle down" of economic condition of this country. No one talks about us. We aren't elibible for the bailouts or programs because we did not gamble, but are now affected by those who did gamble.

I think that speaks for itself. Without work, housing payments aren't happening for many people.

-- Lauren Beale

Thoughts? Comments?

Photo: The Riverside County community of Murrieta. Prices in the 92562 ZIP Code dropped 25% in September from the same month a year earlier, based on 125 sales with a median price of $290,000, and 35% in the 92563 ZIP Code, which saw 147 sales at a median of $279,000, according to DMA DataQuick. Credit: Irfan Khan / Los Angeles Times

Comments

[TK Bruin]

2009 FORECAST

CNNMoney.com just did a piece forecasting the home prices in L.A. will sink by another 17% in 2009!

And they are forecasting the median price in L.A. will drop to $ 269K. Yikes!

Source:
http://finance.yahoo.com/real-estate/article/106107/Forecast-2009:-Your-Home

See chart of numbers from Moody's Economy.com

Can you do a post on this please??

[robert tapia]

no jobs, no mortgage payments... maybe not!!!
Go over Your loan documents for any violations of the FNMA guidelines, which is not only the vast majority of all mortgages, but is also used as an industry standard. Any violations (FRAUD), means the lender must buy back the loan.
The biggest investment most Americans will make is now the target of one of the country's largest financial scams and labeled:
"The Perfect Crime."
When fully exposed, this will make Enron look like a parking ticket. - MSFraud 2003

FIGHT BACK WITH A FORENSIC LOAN AUDIT!!!

[Dean Corso]

If you don't already have a 4-5% fixed rate mortgage then apply for one online at www.naca.com who will provide one at NO cost (through the CRA affilation with banks). I've helped a dozen families save thier homes this way at no charge. Do it BEFORE your credit is ruined. With a lower payment you might free up some money to live by. If you can't do this and can't pay the mortgage then stop making all payments - it will take at least 90 days for a foreclusre action to take place, save up 3 months worth of rent (since your credit ruined anyway and you will lose the house) so at least you can rent a place and not end up homeless and/or on the streets. Good luck.

[latesummer2009]

Unfortunately we are headed for the "Perfect Storm" when it comes to RE Prices. Nobody, will be able to deny it much longer. To many headwinds now:

1) Mortgage Meltdown
2) Job Losses
3) Deflation of all assett types

Westside is not immune..

http://www.westsideremeltdown.blogspot.com

[Angelina Diaz]

I am very pleased to see that i am not the only one that is in this situation. I just recently lost my house due to the same situation as you and received no help. I dont even remember how many places i called and they told me there is nothing i can do to save my house. I really do hope they open their eyes and start realizing other people need help. I have learned to accept my situation but now i have no where to live. I do wish you the best and hopefully you can find someone to help you. Good luck.

[Brad]

People losing their jobs and suddenly becoming unable to pay their mortgages isn't exactly a new phenomenon. Why else does prudent financial discipline demand a minimum of 3 (preferably 6) months of reserve cash? No job is forever, even in the traditionally untouchable public sector.

First, Americans became addicted to easy credit and destroyed their lives with it. Now, socialism has suddenly become trendy and everyone wants a handout of some sort. If taxpayer largess facilitates one incapable home debtor in keeping "their" home then why not everybody? Where do you draw the line? We are one giant protected class.

Not to worry. Once the new messiah-elect is sworn in all will be well and good again. The checks will flow.

[Virgil Bierschwale]

I write about this every day at my web site at http://www.KeepAmericaAtWork.com.

As a matter of fact, I posted an article today titled "Save America" today that describes what we are doing to ourselves..

I also have posted a "Wall of Shame" with the names of the people that are directly responsible for what is happening to America.

When you see them at the country club, be sure and tell them that Virgil says "howdy" from texas and that he has added you to his "Wall of Shame" and he is actively looking for more names.

Virgil
http://www.KeepAmericaAtWork.com

[Billy]

I agree with you Dean, this is a perfect storm and prices will continue o decline drastically the next couple of years. Los Angeles keeps dropping!

http://www.homepricetrend.com

[Laker]

This info is shocking even a RE bear like me, I feel like a Bull.
I never imagined that we are going to get so many people unemployed and lose the houses because of job losses. I really only expected foreclosures to be resulted from ARMS, Option ARMs and subprime 2/28 and such loans.
I agree that a huge tsunami of asset deflation is around the corner. We are going to see wages decreases, rents being slashed down, food prices plummet, etc.
The government is trying to create inflation by opening all doors, valves, and interest rates at 0.23% effective feds funds rate...and nothing is helping...
Over correction in LA housing prices is pretty much a guaranteed deal now. Expect the $1.2 Million dollar Sherman oaks house in 2006, that now costs about $1 Million to drop down to $400,000. Not a joke. We ar heading down to 1995 prices, maybe even lower, as in 1980's prices.

[syscom3]

Maybe you can rent out a room to help free up some expenses.

[eternal summer]

the woman clearly stated that SHE COULD NOT AFFORD THE HOME ALONE!!!!!! Hello? They are EXACTLY the same as every one else; they bought something they could not afford. Ughhh. I am so sick of these people. GO RENT lady and live within your means. Your job is never guaranteed-not even when you own the company!

Where's Peter?

[buz]

Time to rent and acquire a taste for peanut butter and jelly sandwiches. Maybe now Americans will do all those millions of jobs that genius boy Bush said "Americans won't do."

[Leonard]

There are layoffs but I still see thousands of high paying jobs, heres a couple I just used -

www.indeed.com
www.realmatch.com

Good look to those looking for work!

[tew]

No news here. This unfortunately happens to a portion of home borrowers every year. During recessions this happens more frequently. There typically isn't any government program or anything to take care of this.

A lesson for all of us is to have liquid savings to cover bare minimum expenses for six months minimum. This is the same for renters as it is for home borrowers and owners. People also get kicked out of apartments when they can't come up with the rent.

Given the tough times this person should consider finding somebody to rent a bedroom in the house. You do what it takes - put a cot for yourself in the garage if you need to. It's not pleasant, but you do what you have to do. When there are lots of layoffs you can usually avoid having to house a stranger, since somebody you know got laid off and has to vacate his/her apartment. They can pay maybe $300-$500/mo - not a lot of money, but maybe enough to see you through the recession.

[tew]

Laker,

Perhaps we'll fall to 1995 prices in real terms (worst case), but even if we have some generalized deflation during the next couple of years, total inflation from 1995 until 2009 was probably about 25%. So in nominal terms, we'd expect the houses to trade at 1.25x 1995 levels. (Again, worst case in my opinion. I think prices back to 2000 real levels is more likely. The government intervention is going to be massive - they will prop up prices.)

[Kate]

People loosing their homes because their out of work is nothing new. And realistically, if she couldn't afford the home alone and needed her daughter, the preschool teacher to help, then I'm betting they really couldn't afford the home to begin with.

Banks should require anyone with a mortgage to have a 6 month emergency fund. Too many people make the mistake of putting all their savings into a down payment and forget to plan for what happens if they loose their job.

[MyLessThanPrimeBeef]

Laker, the day will come soon when people will be ashamed to admit they are homeowners.
"
"Me? I am a renter," people will be proud to say. (I wish I could say that. So, let me be the first to admit with embarrassment that I am a homeowner.)

[Anonymous]

I do feel sorry for this woman. It seems that she and her daughter are honest, hard-working individuals. But they *did* gamble. They may have been fooled by NAR propoganda into thinking that they were not gambling, but they were in fact gambling. Think about it. You are buying the most expensive asset in your entire life...by a huge margin. This is a gamble (for many people, the biggest gamble of their lives). Do not be fooled by NAR propoganda. Buying a home can ruin you just as easily as it could make you rich. I saw it all through the late 80s/early 90s. Declining prices, recession, divorces, deaths, injuries, health scares leaving people broke because of the foolish decision to buy, credit ruined for almost a decade, self-esteem cratered. Please, if you do not have a massive reserve for the bad times, do not buy a home. It makes no sense to purchase an asset that is so disproportionate to your wealth and income. RENT!

[Uncle Billy Misses Pete]

Eternal Summer,

Pete headed off for greener pastures. He's still involved with words, but not those directly related to real estate. He gave a sad farewell many threads ago.

[E]

Renting isn't the horror story that most people make it out to be.

When people lose their overpriced homes, they can rent for a few years, save some money, repair their credit and then come back into the market in 2011 when house prices will be FAR more affordable and maybe even be able to purchase a nicer house than the one they lost at a much lower price.

Renting out rooms helps too, but that's really just pooling resources in order to pay for an overpriced asset.

[k2polo]

Get the book, "Choose Foreclosure" by The Postman. You can get it at Amazon or go to his website, chooseforeclosure.com Really helps put it into perspective. As for the person who said you shouldn't have bought a home because you alone couldn't pay for it..that's ridiculous! Many, many people over many years have gone together to purchase a family home. So what!!! It is within the family..being used as a primary residence. They did nothing wrong.

[Crash and Burn]

This is precisely why jobs creation is so important and why job losses are so tragic.

Obviously they are going to loose their house, and have to live in something much cheaper where there unemployment/much lower paying jobs are going to cover rent and food. Although if both of their unemployment checks (which are peanuts) cover the mortgage, they probably could afford the house while both were employed, but didn’t have a financial cushion.

The housing market should be priced so that that not only do you need to have the necessary down payment to buy a house, but you also would have to have 6-12 months of mortgage payments saved in case you loose your income. This would lesson price volatility, and help ensure that people who buy houses are ready for prime time. If government really cares about home ownership (I’m not sure why it should anyway), it should offer housing IRAs with some percentage of matching funds to incentivise saving for a house, and eliminate the income tax deduction on interest paid altogether.

This income tax deduction is the biggest price control, command economy (AKA communist economic policy) policy that is in real estate. It artificially inflates the prices of houses, with no gain to anyone anymore (except for the banks of coarse) as the money you save in taxes was already accounted for and added on to your purchase price. At least a housing IRA could be structured where the money you add in adds up to the down payment of your house (forcing people to be able to afford their house), and the government added money could be your cushion, with federal strings attached, this could even be required. This would probably net increase tax revenues for the federal government, and taxes could then be cut somewhere else. Seems like a no brainer to me, oh but I forgot, the banks won’t like it. I guess it doesn’t have a chance.

[bbspringer]

You know what life is a gamble plain and simple. And all these people saying to have 6 months to a year of mortgage payments, Do they? I for one don't. Lets stop out sourcing all jobs and start trying to keep them in the US. Pretty sad when you go and buy a US flag you cant find one made in the US. For that matter try and find any thing made here. We are becoming a joke. I know of people that been in the country a very short time that get all the help they need and have not put anything into this country. LOW/NO INTEREST LOANS, GRANTS FREE SCHOOLING ETC. ETC...Like for one all the Indian gas station owners. Whats going on with that, Did they all watch the Simpsons too much. Nothing against them just some thing that's change over the years. Remember, THE GOOD OLD DAYS!!