There could be trouble ahead in California's housing market as buyers are going deeper into debt while sellers are seeing less profit, according to a survey.
More than 21 percent of buyers last year took out mortgages with no down payment, soaring from just 4.5 percent in 2000, according to the California Association of Realtors, the industry's trade group.
No down payment? How about all those negative down payment cash-back deals? And you still think the lenders aren't in trouble?
UPDATE: Nice timing. On today's WSJ Front Page, In Home-Lending Push, Banks Misjudged Risk:
Many of those [subprime] loans have soured, sometimes quickly. The percentage of HSBC mortgages more than 60 days past due is climbing. Fraud by borrowers [see: Casey Serin; liar loans; cash-back deals undisclosed to lenders] has been higher than expected. "We made some decisions that could have been better," says Tom Detelich, the HSBC executive in the U.S. spearheading an effort to clean up the mortgage portfolio.
In a surprise announcement late yesterday, HSBC said its subprime-mortgage problem was worse than previously indicated. It said the capital it sets aside to cover all bad debts, including the soured mortgages, would be 20%, or $1.76 billion, higher than analysts' consensus estimates. "The impact of slowing house price growth is being reflected in accelerated delinquency trends across the U.S. subprime mortgage market, particularly in the more recent loans," the bank said.
HSBC's mortgage woes provide a window into the economic hangover brought on by the end of the housing boom. In recent months, mortgage bankers have taken a place beside home builders, condominium developers and real-estate agents, all of them struggling to adjust to a new housing landscape.