Wednesday, July 29, 2009

Foreclosures are surging

Everywhere but California! It seems I was wrong about the newest foreclosure moritorium that took effect in June. I did not think it would have much effect because most lenders appeared to be exempt since they already had mortgage workout plans in place. But I've noticed another drop off in new REO's hitting the market. The numbers had just started picking up again in May and now it seems they've dropped off a cliff.

Other bubble cities are seeing foreclosures surging again. Phenix saw foreclosures jump nearly 40% from May to June. In Las Vegas the increase from May to June was a whopping 54%! Even the "it's different here" places saw an increase. Seattle foreclosures jumped 37% from May to June.

I haven't seen the number for the IE but my guess it that we dropped from May to June due to the newest meddling by the state. So instead of the lenders getting the homes on the market during the peak season, it looks like they will be backed up 3 months to the fall. That's not going to help the banks get the most for the properties..

If you think the foreclosure crisis is behind us I suggest you log on to one of the many foreclosure sites (like realtytrac or and take a look at what is coming. This image is a small part of Eastvale in Corona. It's about 1/4 of the Eastvale area and you an see just how many foreclosures are in the pipeline. The yellow dots are homes that are waiting for the trustee sale. The orange dots are pre-foreclosures and the green ones are bank owned. Most of the bank owned are probably already in escrow, because there's not a lot of REO's listed in the area. But those yellow dots will soon turn green and most of those orange dots will go yellow...then green too.


Adrian Smith said...

I got into a discussion recently on a music forum about how housing is currently bottoming. I don't know how anyone can think that with the pending madness in Alt-A and Option ARM crapola looming on the horizon. Foreclosures are going to drag down the market for years, and by "drag down" I mean "make affordable once again."

Currently keeping a close eye on Forest Falls, found a few 5-digit places but nothing amazing... yet.

Sigma said...

I'm looking at buying a home in Corona. When do you guys think it will be a good time?

Sara said...

When they decline another 20%, at least.

golfer_X said...

I also think Corona has another 20% or so still to drop. Right now with the lack of sale-able inventory it's not a good time to be buying. All the buyers are trying to get the same few homes (the REO's). If the government stops will all the moratoriums, there's a good chance the market will be better this winter. There's also talk of them increasing the buyers credit to $15k when the current one expires at the end of Nov. The buyers credit is really helping the low end so I'm guessing they will extend it anyway. It would be nice if they up it to $15k and remove the first time buyer requirement too. I would only consider buying right now if you plane on staying in the home for at least 5 years. If you feel you will be moving on in 5 years or less I would stay the hell out of this market.

Sigma said...

Ok thanks for the advice guys. I was very close to paying $300k for a 3bdrm home in Corona this weekend. I'll heed your advice and wait till at least winter when the next wave of foreclosures hit. I'm hoping the government will stop with the ridiculous foreclosure moratoriums and let prices correct themselves so that the irresponsible homedebtors will get what they deserve and make way for those who were responsible waiting on the sidelines to have their turn.

golfer_X said...

Please make your own decisions and don't base it solely on what you hear on a blog. There are some homes selling in Corona for what I think are decent prices. Not many, but I have seen some. My "yardstick" that I use to determine if a price is good is to compare it to what the house would have sold for in 2000/2001 time frame. That was the last time homes were in the normal range when compared to incomes and rental equivalents. So if you can pick up a place in that price range you are probably doing OK.

BrianH said...

I put this on my blog last week along these lines. The data I pulled was from 7/16:

Ok so I have to put up a disclosure first. I'm pulling this from First American's system called List Source. I'm new to the system so there is a possibility that I'm inputting my criteria wrong however I think I'm doing it right. Secondly I'm new to trying to get my brain around data and I could very well be looking at the wrong stuff so feel free to give me input on other aspects of public records that I might be missing. This is for Riverside County CA.

Total pieces of Real Property in Riverside County: 942,339
Total SFR�s in Riverside County: 487,000
Total SFR�s with a NOD filed: 19,000
Total SFR�s with a NTS filed: 14,500
Total SFR REO�s: 17,700
Total Distressed: 51,200
Distressed percentage of SFR housing stock: 10.51%
Months of housing supply REO's only: 5.87
Months of housing supply factoring all classes: 16.98

Per the local MLS monthly closed SFR transactions are running around 3000.

Note this data excludes any house that is a short sale where a NOD/NTS has not been filled yet. Many people claim banks are simply not filing NOD's and that is probably true in some cases however all these servicing companies/banks are not stupid as one would think and I'm inclined to believe that banks are filling NOD's in most cases because it is the first step in the process and crucial to the note holder as a back up plan if a workout/short sale fails. This is my opinion only as far as these distressed homes without a NOD filed and I could be way wrong on this one.

So looking at these data and factoring in how long it takes a home to move through the process and actually become a REO I personally don't buy into all this shadow inventory talk. We have a major problem and I don't feel we are out of the woods by any means however these numbers aren't as bad as what I was expecting all things considered.

Sigma said...

BrianH, That's a pretty insightful analysis. I'm open minded and certainly keep the prospect of what you said as a possibility , however, doesn't your data conflict with the chart/map of this "Foreclosures are surging" thread? The kaboom thread's map is based on real data as well. So the question is: where is the discrepancy from your data and his?

David said...

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golfer_X said...

On the whole shadow inventory thing, I don't know how you want to classify it but there are shit-loads of empty homes that are not on the market. In the tracts I'm looking there's a bunch of them. On my street there's 3 house that have been empty of months and one of them has been vacant for nearly two years. None of them are on the markte. On my buddies street the house next door to him is empty and has been for at least 6 months. Just around the corner from that there is another home that's empty and has been for more than a year. He says there's water damage but still it's mever been listed. Call it what you will, but there's a lot of it!

I think the last report I saw from Foreclosure radar indicated that 1 of every 8 homes in the IE was in trouble (NOT, NOD, or REO).

OSA said...

X. Since you are far more educated and knowledgable than I, I had a couple of questions

1) For Corona (and the houses you say were well priced) can you give us an idea of the price / square footage? Also what part of Corona

2) You mention that your yardstick is 2000/2001. I had a clarifying question. If house X, umm house Y, sold for 300K in 2001, is your yardstick that the price should be 300K today to be a good deal or should it be 300K plus normal appreciation (not sure but i read it is 3.5%) so 300K plus appreciation for 8 or 9 years. No math whiz here so will leave the numbers to others

As always, thanks for all your wonderful insights

OSA said...

The 3.5% is per year. Sorry for any confusion

Martin Burtin said...

You might get "normal" appreciation once the price is adjusted back to where people can afford the homes (if you're lucky and the economy allows it). Once price reaches 2.5-3X income, the price is about right.

I think he's saying if a home sells for what it would have sold for historically in 2000-2001, then that home is affordable based on incomes today. Any appreciation in the price would have to follow the economy. You don't get automatic appreciation just because years pass by, your home ain't no CD.

Actually, it is a rather marginal if not poor investment for most people, when you figure all the cash it takes to keep it up, the historic pathetic appreciation of homes just keeps you about even, or slightly negative.

Unfortunately, for many, it's all they have to show for a life of hard work, in the end. And now, with 40 yr loans, helocs, reverse mortgages, etc., many don't even have a paid off house, when they retire.

I can imagine that many of those who bought into homes they could not afford, and used "equity" to finance new cars, and lived large during this bubble... well if they don't have enough years until retirement to build back some savings, they won't even be able to afford Sun City or an electric cart, when they retire. Oh, I forgot, no prob, Obama has their backs, no worries.

golfer_X said...

OSA, I don't factor in appreciation. The affordability ratio is simple. All you need to know is price and income or prices vs rent. Since incomes have not really change much since 2000, the price of homes should not have changed much. The price to rent ratios are currently better than the price to income ratios. Normally the two track one another really well. But home prices have fallen faster than rents so the price to rent ratios are actually now in favor of buying in most area. But rents are now falling and with all these investors buying the cheaper homes for rentals, falling rental prices are likely to continue.

As for your first question, I've seen homes in all price ranges that I thought were reasonably priced. And you can't just look at price per sq/ft. I looked at one that was priced at $140 s/f and I thought it was a great deal. It had a big lot, a stunning back yard and the house was amazing inside. I've also looked at homes listed for $90 s/f that I would never buy.

Todd said...

Well... looks like we've hit the bottom. The "experts" say so!

How can anyone actually be saying this now?

Adrian Smith said...

From that Yahoo article:

"By every measure, except foreclosures, the housing market has stabilized..."

Seriously, LOL. Ridiculous. I don't see how anyone can even fathom calling a bottom to any market at the moment it is (supposedly) happening. I am an armchair economist at best, but I know for certain things just don't work that way.