Tuesday, April 15, 2008

Foreclosure filings up 21% from last month in Ca.

U.S. Foreclosures Jump 57% as Homeowners Walk Away

April 15 (Bloomberg) -- U.S. foreclosure filings jumped 57 percent and bank repossessions more than doubled in March from a year earlier as adjustable mortgages increased and more owners gave up their homes to lenders.

More than 234,000 properties were in some stage of foreclosure, or one in every 538 U.S. households, Irvine, California-based RealtyTrac Inc., a seller of default data, said today in a statement. Nevada, California and Florida had the highest foreclosure rates. Filings rose 5 percent from February.

``We're not near the bottom of this at all,'' said Kenneth Rosen, chairman of Rosen Real Estate Securities LLC, a hedge fund in Berkeley, California and chairman of the Fisher Center for Real Estate at the University of California at Berkeley. ``The foreclosure process will accelerate throughout the year.

Bank seizures climbed 129 percent from a year earlier, according to RealtyTrac, which has a database of more than 1 million properties and monitors foreclosure filings including defaults notices, auction sale notices and bank repossessions. March was the 27th consecutive month of year-on-year monthly foreclosure increases. In February, foreclosure filings rose 60 percent

California had the second-highest rate at one filing for every 204 households, and the most filings for the 15th consecutive month at 64,711. Foreclosure filings more than doubled from a year earlier and were up about 21 percent from February.

``The continued increase in new foreclosures implies an even larger drag on prices in 2008,'' Goldman Sachs Chief U.S. Economist Jan Hatzius wrote April 8. Home prices fell 8.9 percent in the fourth quarter, the biggest decline in 20 years as measured by the S&P/Case-Shiller home price index.


Xu said...

i like to read your blog. it is so evidence based and great writing skill. it became to my guildence for my first purchasing in eastvalle.
please continue writing. is it possible to let me know when do you think the market would hit the bottom? i know it is a silly question. but just want your opinion. thank you.

golfer_X said...

When prices return to fundamental norms! (That is when you can rent or buy the same house for roughly the same amount). Most of the IE will need to fall between 50% and 60% from peak values for that to occur. Some of the REO properties in places like Moreno Valley, Perris, Hemet, Murrietta are already getting close to this. It's just a matter of time before it works it's way to the more central areas. I think be late this year or early next year most of the declines will have happened in the IE. Prices may creep slightly downward from there for another few years but I doubt there will be much chance of further substantial declines (The reason for that is obvious. As soon as they fall enough to where they can be rented for a profit they will be purchased by investors).

Sean said...

I agree with you golfer_x. The only thing is... are there enough investors on the sidelines to snatch up all these properties?? I mean its crazy out here (i'm in eastvale). About 10% of the homes out here are either REO or in the preforeclosure process and we havent even hit the alt-a crash which will be happening over the next year. Right now, Alt-A loans are performing the same as subprime loans were a year ago... That could dump another 10% or more of the homes onto the market. At what point do the banks just start boarding these things up and waiting 3-6 yrs for demand to catch up? The killer thing is the Frickin' builders are STILL BUILDING. What is wrong with them!

On a side note did you notice the guy Kenneth Rosen in that article works for a hedge fund that is shorting everything real estate?? Of course he's gonna say "We're nowhere even near the bottom"... Flooding the media with more fear for his own profit. A word to the wise, always look at the motivations/agenda behind people that make comments on things....

golfer_X said...

If you have 10,000 REO properties you don't need 10,000 investors. If the price is right one investor will buy them in bulk right from the bank. The banks will sometimes sell lots of homes to one person or group at a discount. They might buy 1000 homes and pay 70 cents on the dollar for the lot.

The builders don't have much choice. It's cheaper to finish the homes and sell at a loss than walk away is some cases. Besides there are still fools buying them! I can't understand it myself but there are still people paying crazy assed prices. And is it just me or are most of them Asian? Don't the local Asian newspapers carry stories about the crashing real estate market??

Sean said...

Agreed. That would be great if an investment was made and a bunch of them were grabbed up and rented out. That would help stabilize things. You're right about the homes still selling (but to a lesser extent obviously than in 04,05,06). I am not sure if they are "all asian" though. We have new construction going up across the street from us and we've seen many families hanging around in the evenings watching their homes be built. The demographic makeup looks to be pretty similar to the people that live here now... Some white, some asian, some hispanic. They seem excited by the deals they got. The builders are giving crazy incentives like granite, fixtures, etc, etc... and discounting their prices and people are indeed buying these things up. It defies what my gut is telling me but I am typically extremely pessimistic so I need to temper that and try to see if from their perspective. Prices are the lowest they have been since 2003/2004 which incidentally is when i bought. Mortgage rates are still very very low which helps a lot. The monthly payments on these cheaper houses are almost in line with rents in the area. Also, homes here are much bigger and MUCH cheaper than Orange County which I have always believed was a big draw to Corona and Eastvale. As long as the area is a relative steal in the region people WILL move here and buy houses. I am starting to think the long term prospects for the area are not as bad as my doomsday feelings over the past couple of years have led me to believe. Having said that, if the prices tumble further in the OC then they will follow in kind here in Corona/Eastvale. Only time will tell!!!

One good thing for my family is we paid almost nothing for our house because of a "move up buy" so we're in fine shape. Many people I know in the area also did move up buys so I dont think we'll see MASSES of people walking away from their homes. No doubt we will see more and more foreclosures and walkaways mainly in the subprime and alt-a segments of the market but the overwhelming majority of people around here will not trash their credit as long as they can afford their monthly payment and if they can't they will sell or refinance using one of the govt sponsored programs or simply with their original lender. An interesting thing to note is all we hear about are all the mortgages that are SCHEDULED to reset. We dont hear about how rates are low and even resets arent necessarily a doomsday scenario and we also dont hear any numbers on how many people have already refinanced into a better loan since they took out their toxic teasers. Why is nobody reporting those numbers?

golfer_X said...

Rental rates and home prices are still quite far apart even in Eastvale. You are right, they are getting closer but I think there's another 20% to 25% still to go in Corona. Last I checked the average rental over in that area was about $2k per month for a 3 bedroom (and 2300-2500 for a 4 or 5 bedroom). To get a house payment that cheap you need about a $260k price. I think most real investors are looking at a rent multiplier of about 120 in the IE and that works out to $240K. A $260k loan (with stellar credit) will get you a payment of about $2k once tax and insurance are factored in. Any tax savings will be offset my the home maintenance and PMI if you don't have 20% down. These days very few people are putting 20% down. I think the smaller homes will probably bottom out in that area over in Eastvale. It might take another year or even two but that's where the fundamentals say the prices should be. At they rate they are falling it's not hard to imagine them getting there. Another 20 miles east or south of you the prices have already fallen 50%+. And those declines are working there way west. The OC's gonna go postal when they start seeing declines like the IE is seeing. They were 2 years behind us in the last crash, I wonder how far behind this time.....

Sean said...

you're right the rentals are in the 2000 to 2900 range. The 2900 is pretty much for the 5 and 6 bedroom biggies we got up here. Not a bad little to fetch actually if you own one free and clear or bought it when it was cheap!

Anyhoo, you're right it still has a long way to go down. My prediction is the bottom will be January 2009 with the following:

25 percentile - $260,000
50 percentile - $300,000
75 percentile - $340,000

When you said 20 miles east and south you meant riverside and lake elsinore right? Yeah i've noticed those areas have absolutely plummeted. Thats what happens to not so great areas when they get super inflated. Not only are the homes not worth what they are priced at but also the area is crappy so not many people want to really truly live there anyways.

Anyways, long live Eastvale man! I'm stickin' this one out. Riding it all the way into oblivion! :P