Mortgage Job Losses Surpass 40,000

Foreclosures, Short Sales, Tax Foreclosures
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Mortgage Job Losses Surpass 40,000
2007-08-22
Associated Press/AP Online

By IEVA M. AUGSTUMS

CHARLOTTE, N.C. - At the North Carolina offices of mortgage lender HomeBanc Corp., Archie Clark is the only employee left. But in a few days, he’ll be gone, too. When Clark finishes helping movers from the company’s Atlanta headquarters collect computers and other property, he’ll join the more than 25,000 workers nationwide who have lost jobs in the financial services industry since the beginning of the month - with more than half coming since last Friday.

With few exceptions, the cuts are the direct result of woes in the nation’s housing market.

More layoffs are announced daily. On Wednesday, Lehman Brothers Holdings Inc. closed its “subprime” mortgage business, laying off 1,200 workers at 23 offices; Scottsdale, Ariz.-based 1st National Bank Holding Co. closed its wholesale mortgage unit and cut 541 jobs, and Accredited Home Lenders Holding Co. added 1,600 positions to the heap. The night before, banking giant HSBC said it would close a main financing office and cut 600 jobs.

Since the start of the year, more than 40,000 workers have lost their jobs at mortgage lending institutions, according to recent company layoff announcements and data complied by global outplacement firm Challenger, Gray & Christmas Inc. Meanwhile, construction companies have announced nearly 20,000 job cuts this year, while the National Association of Realtors expects membership rolls to decline this year for the first time in a decade.

It’s an employment collapse that threatens to rival the massive layoffs in the airline industry that followed the Sept. 11, 2001, terrorist attacks, when some 100,000 employees lost their jobs.

“It’s far from over,” said Bart Narter, a senior analyst with Celent, a Boston-based financial research and consulting firm. “The subprime lending collapse will continue to ripple through the financial sector.”

For five years, the nation’s housing market was booming and mortgage companies grew quickly, at times offering lucrative jobs to people with little experience. But as home values declined and interest rates rose in the past year, rising delinquencies and defaults - especially in subprime mortgages targeted at borrowers with risky credit - have pounded lenders who couldn’t keep pace.
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What do you guys think this means for us and our future as REI or does it mean anything at all?

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Markets (including RE) are cyclical. We had 5+ years of price escalations and speculation and rampant ignorance as to the nature of the market. The bubble burst and prices started to fall. In turn, borrowers could no longer count on the equity ATM machine so they started defaulting. And Wall Street is coming to the realization that valuation models for their brainiac security inventions are flawed. So now the credit markets are in shambles and a recession is on the horizon.

What does it mean to the real estate investor? Real Estate is cyclical. Conduct yourself accordingly.

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With that said, let me pose this question. With the state of the market right now, is this a time for new investors to get started or a time when only seasoned investors can survive in a market of recession? In other words, should new investors sit this one out, until the market has become stable or at least until they have a grasp of what is going on? Can money still be made in the real estate with the current market?

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Money can always be made in real estate. The key is buying at the right price (i.e. pennies on the dollar). I don’t know if you can generalize and say it is a bad time for new investors to be getting in - it certainly is more challenging now. If you were an investor (new or seasoned) in 2001 you couldn’t help but make money through 2005 because of price appreciation. That is no longer the case.

The difficulty that I see right now is trying to project numbers. If I buy a fixer or foreclosure, how long will it take me to turn it around and liquidate it - and what will it be worth then? Frankly it’s hard to determine what anything is worth today, let alone in 3-6-9 months that it may take to market it…

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I 100% agree with everything you said. The biggest obstacle right now for new or old investors is projecting the numbers for future return and even immediate return. I think it’s valuable to be an all around REI and not just a rehaber or short saler. This gives you an all around arsenal of creative investing to survive in whatever condition the market may be in. I was hoping to get more insight from others, but thank you for replying to my post.