The Daily Soak - June 6

Q: Hi, How Much Is the Rent? A: How Much You Got?

The excess inventory of the HousingBath has created an ideal situation for potential renters in Florida, but more and more renters are getting burned by leasing properties in pre-foreclosure. With slim prospects for selling, many desperate homeowners are hungry for tenants and whatever cash flow they can get their hands on. The Palm Beach Post reports on a mother and son who leased a Palm Beach Gardens house before learning that the original owner had bought the house for $710,000 in 2006 and sold it to a relative a month later for $10. And while the owner is on probation for mortgage fraud, the renter is still on the hook for monthly rent. Renters are encouraged to research foreclosure filings on their local county clerk's website.


Lifestyles of the Formerly Rich & Recently Foreclosed

From Ed McMahon to Evander Holyfield, the media can't seem to get enough of Celebrity Foreclosures, but CNBC's Diana Olick says "Enough Already!" Olick rails against the formerly rich for their inability or unwillingness to save and spend rationally during their respective heydays. Evander Holyfield's 109-room Georgia mansion and Veronica Hearst's 59-room Palm Beach villa are viewed as two examples of wretched excess. Appearing on Larry King last night, McMahon took a page from the Patrick Ewing School of Economics: “If you spend more money than you make, you know what happens.” During the 2005 NBA player's strike, Ewing offered this gem to rationalize the player's stance.


Subprime Crisis Was Bad...Option ARMs Could Be Worse

BusinessWeek looks into the housing crystal ball and sees an avalanche of option ARM resets triggering the next wave of housing foreclosures. The next wave could start as early as April, but there are already signs of distress according to the Mortgage Bankers Association. The rate of foreclosure starts for option ARMs in Florida jumped from 0.7% in the first quarter of 2007 to 2.57% in the first quarter of this year. A mortgage strategist at Credit Suisse put the option ARM HousingBath in context, "Most of the public is thinking that the subprime thing is over, but this is another thing waiting. The problem for these borrowers is that once you go underwater, it's very hard to refinance, and if you cannot refinance there is very little option for you." So many Option ARMs, so few options.