What's in the news

A 55% increase in "shadow inventory"

Dec. 17 (Bloomberg) -- The number of homes that may be in the pipeline for a sale because of foreclosure and delinquency climbed about 55 percent to 1.7 million at the end of September, according to estimates by First American CoreLogic.

The “shadow inventory” rose from 1.1 million a year earlier. Such properties include those taken over by banks and mortgage companies and those where the loans are at least 90 days delinquent, the Santa Ana, California-based research firm said in a report today. The number of unsold homes listed for sale was 3.8 million in September, down from 4.7 million a year earlier, First American said.

...............................

Walking away, it's not a moral dilemma for banks! They tell homeowners to "do the right thing" but they themselves do what is most financially prudent.

Dec. 17 (Bloomberg) -- Morgan Stanley, the securities firm that spent more than $8 billion on commercial property in 2007, plans to relinquish five San Francisco office buildings to its lender two years after purchasing them from Blackstone Group LP near the top of the market.

The bank has been negotiating an “orderly transfer” of the towers since earlier this year, Alyson Barnes, a Morgan Stanley spokeswoman, said yesterday in a telephone interview. AREA Property Partners will take over the buildings. Barnes declined to say when the transfer will occur.

“This isn’t a default or foreclosure situation,” Barnes said. “We are going to give them the properties to get out of the loan obligation.” Eh so you are walking away, right!

The Morgan Stanley buildings may have lost as much as 50 percent since the purchase, he estimated.

Commercial mortgage defaults more than doubled in the third quarter from a year earlier as occupancies fell, according to Real Estate Econometrics LLC. Office vacancies will reach a near-record 19 percent in the first quarter of 2011, broker CB Richard Ellis Group Inc. estimated.

.............................

Is that all?

Eventual losses at mortgage giant Fannie Mae could exceed $200bn, posing a risk of receivership after year-end when limitations on the Treasury Department’s authority to support the agencies return, according to research Friday by Barclays Capital (BarCap).

Once the added authority expires, the Treasury will no longer be able to increase the size of the $200bn preferred backstops supporting Fannie and brother agency Freddie Mac without consulting Congress.

..........................

Cramdown shotdown!

WASHINGTON (Reuters) – In a win for the banking industry, the U.S. House of Representatives voted on Friday to reject a measure that would have allowed bankruptcy judges to change the terms of mortgages for distressed homeowners.

Known as "mortgage cramdown," the measure was defeated in a 188-241 decision as a proposed amendment to a broader financial reform bill expected to win House passage later on Friday.

The House had approved a mortgage "cramdown" measure in March over the objections of Republicans and bank lobbyists, but it died in the Senate.

Cramdown would help stem the home foreclosure wave continuing across the United States, its advocates said. But opponents said it would raise costs for everyone and divert capital from the mortgage debt market.

.............................

DQ November report

The November report is out. No surprises here. Sales were strong although 15% below an average November. The impending end for the home buyer tax credit spurred a lot of sales. The lack of low end inventory is also showing up in higher median prices. Similar to what happened in late 2006 and early 2007 when the median was rising because only the higher end homes were selling. Inventory continues to decline. Some of that is due to the holiday season. Many people pull their homes off the market this time of year.

Even though there are far fewer REO's on the market the amount of distressed properties is huge. Here's the latest numbers on that first.

(the numbers are the running totals for the last 120 days (through mid Dec))
Riverside,
NODs 12736
NOTs 14553
NOT sales 6755

San Berdu,
NODs 9834
NOTs 11771
NOT Sales 5558

Here's the DQ report,

Southern California’s housing market continued its step-by-step climb up from the January-February bottom as both sales and prices saw gains last month, a real estate information service reported.

A total of 19,181 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 13.3 percent from October’s 22,132, and up 14.7 percent from 16,720 for November 2008, according to MDA DataQuick of San Diego.

Sales almost always decline from October to November. The year-over-year increase was the 17th in a row. In DataQuick’s statistics, which go back to 1988, the average November had 22,312 sales.

Sales of newly built homes saw an unexpected jump last month. A total of 2,039 new homes were sold, the highest of any month so far this year, and 25.5 percent ahead of 1,625 for November 2008.

Sales have been stoked in recent months by several factors: A federal tax credit for first-time buyers, which had been set to expire last month before it was extended and expanded; robust investor activity, especially inland; super-low mortgage rates; the availability of government-insured, low-down-payment mortgages for first-time buyers; and the allure of a potential “deal” on a distressed property.

	Sales Volume			Median Price
All homes	Nov-08	Nov-09	%Chng	Nov-08	Nov-09	%Chng
Los Angeles	5,037	6,257	24.2%	$340,000	$329,000	-3.2%
Orange	2,177	2,528	16.1%	$400,000	$432,250	8.1%
Riverside	3,719	3,745	0.7%	$220,000	$200,000	-9.1%
San Bernardino	2,385	2,751	15.3%	$185,250	$160,000	-13.6%
San Diego	2,673	3,148	17.8%	$305,000	$325,000	6.6%
Ventura	729	752	3.2%	$355,000	$365,000	2.8%
SoCal	16,720	19,181	14.7%	$285,000	$285,000	0.0%

Realtor 101

This fella failed Realtor 101 for sure!

As most of you know by now, I really hate when a person puts ZERO effort into a listing. I mean, for pete's sake you are trying to sell a house and make a living. If he sells this house he will probably make around $7k after splitting with the broker. You'de think he would put just a few minutes of effort into the listing.

So here it is, 1796 Irving St, in Riverside. This is an average sized house on a huge orange grove or something. The trees look small so I doubt it is an income producing grove. It says the previous buyer paid $1.1M for it in 2006. That price seems nutz but then again what wasn't in 2006. Now it's listed for $495k and this is the best (and only) picture Realtor George Wong can come up with.....

Heck that could be my back yard, or a park or just about any thing. No house, really George ya couldn't snap just one picture of the house? And to top it off here is the complete description from the listing,
"8.1 acres - 352,836 square feet of fruit trees, water wells, 2348 sqft house with two car garage. Owner paid $1,100,000 on 5/2/06. Great opportunity. BUYER TO VARIFY ALL INFORMATION"

Oh, tell me more, your riviting description has me aching for more details!

I don't know if this qualifies for a Realtard of the month award but it's got to be a contender.

55% underwater

I found this chart at Dr Housingbubble. It looks like nearly 55% of the mortgages in the IE are underwater. Most of them WAY WAY underwater!

The thin months

Now that we have moved into the holiday season the new REO inventory will be really thin. Banks really don't like to kick folks out of their homes during the holidays. From a PR standpoint it's not a good thing to throw a families Xmas tree and presents onto the front lawn during an eviction. That sort of behavior will get you on the 6 o'clock news for sure.

So, if you are in the hunt for an REO property, don't expect too much until around Feb. Since the banks don't foreclose until after the holidays and there is another couple of weeks to get the home listed we are looking at sometime in Feb before there is any chance of a decent supply of REO's.

More on Mods

The HAMP mortgage mod fiasco is the single biggest reason there are few homes on the market right now. This is the king pin of the Obama save the home owners plan. So how is it working?

Not so good. Overall something like 25% are already behind. The longer they have been enrolled the higher the percentage of late pays. After 3 months it's closer to 50%. The delinquency rate show the epic failure of this plan. Yet the administration thinks the answer is to pressure the lender to offer more mods and make the mods more affordable.

An example of just how epic a failure this plan is comes from JP Morgan. They have initiated around 178,000 mods. Of that 178k, 22% of them didn't even make the first payment! Even the treasury expects the re-default rate to be 40%. Unfortunately that estimate is proving optimistic as the actual number is looking more like between 50% and 60% (after a year). According to one study, even with payments cut an average of 34%, 65% of borrowers fell back into delinquency. So if we are cutting payments 34% and people still can't pay.......where do you go from there. How about a 30 year loan, payments of $1 a month with a balloon for the balance at the end. I bet that one gets a 100% success rate!

It's fairly obvious people are using this plan to get more free time in the home. They get another 3 to 6 months under the mod, then the bank starts the foreclosure process again and that takes another 6 to 9 months. If they can initiate a short sale they might even be able to squeeze 3 or 4 additional months out if it. That could mean another year to 18 months of free living.

Hope springs eternal

Hope, how long would you hold out hoping of some rich foreign national snapping up your unbelievably overpriced house? Would you wait a year? two years? how about 846 days and still counting....

2902 Vandermolen is a 3 1/2 year old house that has NEVER been lived in. This was obviously an investment gone wrong. Purchased for $1.053 million right at the peak of the market this house will be a monumental loser (if they ever sell it). They have been trying to get $1.25M for a couple of years. After putting in the fancy front landscaping they are probably into it close to this amount (once selling costs are factored in). The back yard is still dirt though. The inside of the house is not what you would call upgraded. It has your standard stainless appliances, cheap carpet, cheap ceramic tile and rather ordinary fixtures. They have recently dropped the asking price to $1 million. The problem for the sellers is that the house is probably worth about $550k max based on the comps.

I seriously think I want to throw an offer for $450k at them just to piss them off!

Here's the median sales price by city for October from DataQuick. The county wide median has stayed about the same for 3 months now (it was $190k in August also). Some cities went up slightly and some went down. Prices just seem to be bouncing around right now from month to month.

City................................ sales....2009.......2008...... yoy drop

Riverside County	4,055	$190,000	$230,000	-17.39
AGUANGA	4	$220,000	$304,500	-27.75%
ANZA	4	$146,750	$107,000	37.15%
BANNING	44	$123,500	$142,000	-13.03%
BEAUMONT	126	$205,000	$252,500	-18.81%
BLYTHE	4	$95,000	$280,000	-66.07%
CABAZON	7	$55,000	$75,500	-27.15%
CALIMESA	9	$145,000	$181,000	-19.89%
CATHEDRAL CITY	82	$155,000	$195,000	-20.51%
COACHELLA	49	$141,000	$196,000	-28.06%
CORONA	444	$330,000	$350,000	-5.71%
DESERT HOT SPRINGS	119	$95,000	$119,500	-20.50%
HEMET	198	$125,000	$154,000	-18.83%
HOMELAND	9	$129,000	$199,000	-35.18%
IDYLLWILD	10	$199,000	$180,000	10.56%
INDIAN WELLS	13	$450,000	$750,000	-40.00%
INDIO	147	$193,000	$230,000	-16.09%
LA QUINTA	117	$276,000	$305,000	-9.51%
LAKE ELSINORE	144	$170,000	$210,000	-19.05%
MECCA	3	$70,000	$110,750	-36.79%
MENIFEE	99	$195,000	$240,000	-18.75%
MIRA LOMA	38	$265,000	$302,818	-12.49%
MORENO VALLEY	368	$135,000	$170,500	-20.82%
MOUNTAIN CENTER	4	$301,000	$235,000	28.09%
MURRIETA	276	$235,000	$266,000	-11.65%
NORCO	27	$312,000	$390,000	-20.00%
NUEVO	12	$125,000	$194,000	-35.57%
PALM DESERT	120	$290,000	$350,000	-17.14%
PALM SPRINGS	181	$145,000	$267,500	-45.79%
PERRIS	208	$147,000	$169,000	-13.02%
RANCHO MIRAGE	44	$497,500	$435,500	14.24%
RIVERSIDE	511	$180,000	$225,000	-20.00%
SAN JACINTO	114	$146,000	$170,000	-14.12%
SUN CITY	145	$170,000	$210,500	-19.24%
TEMECULA	245	$262,000	$308,250	-15.00%
THOUSAND PALMS	4	$118,000	$130,000	-9.23%
WHITE WATER	2	$85,250	n/a	n/a
WILDOMAR	70	$235,500	$280,000	-15.89%
WINCHESTER	51	$250,000	$265,000	-5.66%

Bad bank!

Well, it looks like the government is rolling out ANOTHER plan to save troubled home owners. It's all to evident at this point that the mortgage modification plan (HAMP) isn't working all that well. Out of 500,000 trial modifications less than 2000 were made permanent.

What's the newest plan you ask? They are going to try and shame the banks into making more modifications permanent. Yup, they are gonna start calling the banks names! I can see it now as Obama says "Bank of America, you just suck. You only modified 500 loans".

I wonder how long this will back up the mythical Tsunami and what will they come up with next. This one is so lame it's almost an admission that they are out of ideas.

There's no place like 2006

Here's a delusional seller, clicking his heals together and chanting "there's no place like 2006, there's no place like 2006, there's no place like 2006". Unfortunately his fairy god mother isn't going to wave a wand and bring those prices back for him. I would think that by now every one has gotten the message that the real estate bubble has popped. You can't list tract houses in the IE for $300 s/f any more. Even more amazing is that there's still agents willing to clutter up the MLS with these garbage listings.

12710 Canyonwind is in the Orchard Estates area near La Sierra Blvd and Victoria (just below Victoria Groves). This house was built in 2001 and it says it sold for $208k. I don't think that's right because these sold for around $400k. The house is huge at nearly 4800 s/f. It has 6 bedrooms and 3.5 baths. It's also got all the fancy fluff that people were putting in with bubble equity, like a theater, a fancy pool, a pond, a fake golf green etc. It's a nice house and I'm sure the owner has dumped $200k at least into all these upgrades. But the sad reality is that most of them don't add much to the value of the home. I doubt very much this house will fetch anything higher than $600k and even that is reaching right now. I've seen a lot of houses easily as nice as this one but slightly smaller selling in the mid $400s.

Even the 3 High estimates on the Redfin page are in line with my estimation. Zillow has it at $585, Eppraisal has it at $650k and Cyberhomes has it at $480k. There's not much in the way of Comps in the same tract but the ones listed on the Redfin page are all between $390k and $535k. So the Comps are in the $400-$535K range, the estimates are in the $480k to $650K range, what would you think they list it at? NOPE! $1.4 MILLION!!

Congratulations you get the ASS CLOWN AWARD for November

Happy Turkey Day!

Sorry about not posting much this week. Been busy with other stuff......

Happy Thanksgiving everyone.


TFLG

Here's some numbers to digest

Banks increased their Bank Owned (REO) inventory slightly, by taking back 22.24 percent more properties than the preceding month, while REO resale’s declined. The decline in REO resale’s is not unexpected as REO inventories have declined to a point that is insufficient to meet market demand.

Riverside Co.
Notice of Defaults.........last 120 days...13296.......... in Oct. 3872
N.O.T. sales currently scheduled.........15578.......... in Oct. 4377
Actual Trustee Sales.... last 120 days...6600.............in Oct. 1997

(Of the 1997 Trustee sales about 75% went back to the beni, but nearly 500 were purchased by a 3rd party (mostly flippers/investors probably)

San Bernardino Co.
Notice of Defaults.........last 120 days....10282..........in Oct. 3167
N.O.T. sales currently scheduled...........12618..........in Oct. 3416
Actual Trustee Sale...... last 120 days.....5404..........in Oct. 1633

(of the 1633 about 82% went back to the beni, 300 were purchased by a 3rd party)

You can see that many more homes are being picked up at the trustee sales. A year ago nearly every home went back to the lenders. Now 20% to 25% are being purchased by 3rd parties. Many of those will show up later as flips or as rentals. Foreclosure numbers are finally picking up. However, traditionally banks don't foreclose on homes over the holidays. So, it is very likely to slow down again in December. That takes us out to the time frame I keep hearing, Feb/March before we start seeing a significant increase in the REOs.