The Seattle metro area was fairly well protected against some of the bubble activity for a little while, but it didn’t last. While much of the country began to collapse in pricing starting in 2006, it didn’t hit our area till August 2007. And, even then, part of it began with the constriction of lending – which was caused on a national scale. Think of the butterfly effect in that when Phoenix, Florida, Las Vegas and other high appreciation areas (at the time) began to no longer sustain their growth and borrowers couldn’t handle or refinance their adjusting loans, the banks adjusted their lending criteria across the full spectrum of the USA, making it harder to buy a property for just about everyone.
You can read more about the latest foreclosure statistics tracked by Realty Trac at this link. The article will tell you foreclosures were up in 72% of the major 20 metros in the USA – Seattle was ranked #2 in increases for 2010.
When unemployment began to creep up – it went over 9%. A lot of those lost jobs in our area were in the construction industry. When loans were harder to get, and it continued to get harder between 2007 and 2009, fewer people bought homes. Builders cut back, and then they started losing projects, or they couldn’t finish projects. FHA wasn’t approving new condo buildings so they sat stagnant in their sales and the builders stopped building…. Which causes more unemployment. On top of it, these same banks that were slashing lines of credit and lending options began to crank up their interest rates on credit cards – so it became harder for people to pay their bills, and their debt-to-income ratios began to artificially inflate because monthly payments were rising faster than their paychecks even if they weren’t adding any new debt.
I know how many people we at Team Reba have worked with in the past 3 years who are in foreclosure, or near to it, who are the people affected by this downturn and many of them were working in field ancillary to real estate or construction. The people at the appliance store that shut down, the concrete guy, the carpenter, the plumber…. the list goes on. We’ve watched our real estate, builder, and mortgage colleagues losing their homes, going into bankruptcy, dealing with divorce from financial stress, dropping health insurance because they can’t afford it anymore, putting their kids on State provided health coverage, going to food banks to feed their families, and more.
We also started seeing the “white collar” side of it too.
Companies that were “right sizing” laid off hundreds and then thousands. Other firms cut back benefits and then some of our client roster included those with life threatening illnesses who no longer had insurance. Or who’d been hit by job loss and a major illness.
The saddest part for us has been this… for the majority of situations we run into, these are hard working (or those that want to be but no jobs exist) people. They didn’t run up their bills in frivolous situations.
The ones that I personally struggle with the most, are the people who come to us asking for help because they want to do a “strategic default”. They’re in perfectly good financial standing and they want to upsize to take advantage of today’s market and then default on their current home because it’s now underwater. Let me tell you something…. The programs that the taxpayers have put billions into wasn’t made for you. I watched a former Boeing engineer who wasn’t originally from the USA leave all his bills behind and leave the country. Guess who gets to help pay for the losses he left here? Plus, those folks need to be very careful in today’s lending environment – the lookback period for possible fraudulent activity, and this is indeed considered mortgage fraud, is creeping up from 90 days to a year. Feel like putting a felony on your record? Then go this route.
The other ones I have a hard time empathizing with are those where the spending didn’t get cut back. We Americans are a very upbeat and positive thinking people, it’s part of what makes America great – but there are some who are also out in left field with major shopping addictions. I have a former client who had about 1/4 of a major sized walk-in closet with clothes that the tags were still hanging off of. I learned about her foreclosure the day I showed up to stage her house and the notice was on the garage door having been posted overnight. Guess where she was? She’d just left on a flight to go on an expensive vacation with her family. In conversations with her, she refused to adjust her spending and she also refused to see the reality of her situation. I could have sold her home by dropping the price below competing houses and the new construction that was nearby (same builder and style of homes for $100k less than she wanted to ask) and had her walk away with $50-75k in her pocket but instead she held out for an artificially high price on her home and lost it all. And, then her marriage. And, from what I hear, she may be about to lose her well paying job next because she can’t see how her actions are affecting her and those around her. Some people just don’t know how to get out of their own way.
Today’s post is probably more negative than I typically like to write. But it’s the honest truth of what we see every day in our work. A webinar that I watched recently said it best when it described the “emotional tsunami” that has hit not just the USA, but the world, with the near collapse of our financial infrastructure and its effects on individual families. I’ll leave this on a positive note. With all the negativity, I’ve also seen some of the finest behavior come out of others who are helping those in need. I’ve watched me and my team, and our colleagues continue to give back to our communities in as many ways as we can, and usually without much notice or thanks. I’m proud of what I do, and I’m proud of the team I work with and their continued drive to always do better, to help others, and to do the right thing – even in the face of extreme adversity.
