Monday, June 22, 2009

Is the wave here?

Mr Mortgage seems to think the newest foreclosure wave is finally starting to hit..

The wave is here even though it did not show up in the aggregate numbers released by RealtyTrac yesterday morning. In their report, CA aggregate foreclosure activity was reported down 4.46%. That is not accurate.

There are three stages of foreclosure, which we track religiously every day. Because each stage is separated by a period of up to 4-months, the mix can change dramatically causing the aggregate to move in the opposite direction of present conditions. Additionally, back in 2008 most servicers all did things the same way at the same time. Now, each bank and servicer has their own agenda so the monthly numbers are much more volatile, which can lead to misinterpretation.

In May, aggregate foreclosure activity was not down 4.6%, rather up 13.5%. On a more granular level, the takeaways are that Notice-of-Trustee Sales are up 100% from Feb to May and subsequent foreclosures are up 75% from March to May - these are significant events. Especially when considering that the housing market at the low end has been benefiting in part by the lack of inventory caused by the Q4 2008 - Q1 2009 moratoria.

So, why aren’t foreclosures up 200% - 300% from March and back to all-time highs, as the March through May Notice-of-Trustee Sales surge would indicate? It’s because of capacity and timing.

We know for a fact the GSE’s and several servicers came off moratorium around the time that Obama made public the Home Affordable mod and refi programs at the end of March. From there the servicers had to make the decision to participate, integrate the new borrower modification and loan decisioning and slotting technology and train staff. If this took 6 weeks, which would be incredibly fast, then in the second week of May they would have started re-qualifying and contacting the back log of distressed borrowers with the new loan mod, workout and refi offers. Then they have to give the borrowers a reasonable time to accept or deny. It is only June 11th — there simply has not been enough time. But early foreclosure numbers for June show the foreclosure ramp remains intact.

The Notice-of-Trustee Sales and foreclosures will continue to come. Notice-of-Defaults — the first stage of foreclosure and the earliest leading indicator of everything mortgage, housing and balance sheet related — have been hitting record highs since December.

The past 6-month NOD average is 45k…the 6-month average for the worst time in the summer of 2008 was only 43,500.

The subsequent foreclosures that come from this latest 6-month NOD surge will hit about the same time a mortgage mod re-default surge from the 2008 NOD surge does. At this point if new NOD’s have leveled out or even fallen by 50%, the re-defaults from bad loan mods made when mods were new and even more reckless than today will keep foreclosures as headlines through next Spring at least.


So, is the next wave starting to hit? Only time will tell. I am still seeing a higher number of properties hitting the market in my target areas. That would seem to indicate the number of foreclosures are starting to increase. The inventory levels are still a little low and the better homes are still selling fast. The 4th quarter of the year should be very telling though.


Tyrone said...

Here is the data from Sonoma county through June 22. Foreclosures are ramping back up. They easily exceed the past few months and we have 6 more glorious foreclosure-days left in the month. NODS will come in around 510.

2009 NODs:
Jan 394
Feb 468
Mar 553
Apr 497
May 491
Jun 388

2009 Trustees Deeds:
Jan 166
Feb 151
Mar 151
Apr 121
May 123
Jun 149
Jul 205

More data HERE

Jesse said...

Welcome back X! We missed ya! I am looking in eastvale, I think theb wave is starting to hit. Number of actual sales @ the auction is creeping upwards. What I don't understand(Well not that I expect logical decisions from the banks!) the fact that banks are postponing sales. Out of 250+ active foreclosures each month, they actually go thru just 35ish. Inventory is finally going up after hitting rock bottom last couple weeks(and I am not talkin abt short sales!). I think finally the blood bath is slowing down. Should be able buy a house in fall or winter! I know It won't be the bottom but its where I feel comfortable I guess! but I aint over paying though! I'll wait until I don't have bid with those knuckleheads! Thanks for your work X!

Todd said...

I think I'm seeing a few drops from the eventual "wave" in Rancho Cucamonga. I've seen a few listings the past few days that appear to be priced a little bit lower than normal for the area. Most appear to be bank owned or short sales but I'm not positive about that.

cameron said...

Don't look now Southern Californians, you missed the bottom! Buyers are off the fence and in the game.

Welcome back everyone,

Cameron Novak
Corona & Riverside Real Estate

tim said...

@Cameron- You're a real estate agent, right?

I'm not a real estate agent and can't even begin to understand the complexities of buying a home. But the way I see it, with the economy being the way it is, the prices of housing just doesn't seem to be sustainable given the mismatch to wages. $500k+ home in areas where the average is $80k or less? I might be getting my averages/medians mixed up... but I know for a fact that the bottom ain't even close to here.

tim said...

errr... average INCOME! Duh.

Todd said...

I really hope that was sarcasm. I have a feeling that you were being serious after looking at your link however.

I strongly recommend spending some time doing some research at the following links:

Rt.66 said...

Cameron Novak, is it too late? Can I still get in the game?
Can you help?

Allison said...

Missed the boat, hilarious.

Interest rates are up, and inventory is still down in the zip I'm targeting. Don't think I would miss the boat even if I waited another couple of years.

So glad I have an agent who is also a friend and doesn't feed me lines of crap. He's more of the "If you wait longer, this will probably be cheaper" kind of a guy.

golfer_X said...

You won't miss this boat if you wait a decade!

Missing the bottom will be impossible to do. We will be scraping along it for years. Real estate bottoms are flat. They are long and flat. This one will be longer and flatter than most. Some areas in the IE might be on the bottom, some might be close but others still have a long way to go. Missing the bottom.... "pa-leeze".

Cameron, stupid canned realtor remarks will not endear you to the readers of this blog. Try honesty, there are some other realtors that post here and they bring more to the table than silly CAR propaganda.

Tyrone said...

What we've got here... is failure to communicate.

OSA said...

X. do you have a listing of what cities you believe are at bottom, near bottom or still need to get there?