More Foreclosures Than Home Sales, Again

Submitted by Rich Toscano on August 30, 2009 - 5:09pm

As with every month so far in 2009, more existing San Diego homes went into foreclosure than were sold. Just barely, though -- the ratio of home sales to default notices (the initial stage of foreclosure) was just gnat's eyelash below one-to-one. The ratio was .997, to be exact. That's the best sales-per-default ratio all year.

But it's still terrible. The following graph shows that while the sales-per-default ratio is above the lows set earlier in this downturn, it's still well lower than it was at any time during the two decades or so that preceded the current housing crash.

continue reading at voiceofsandiego.org

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Submitted by urbanrealtor on August 30, 2009 - 7:33pm.

Couple of points and questions.

I am still not clear as to what precisely constitutes shadow inventory. Do we have a clear definition of that term as used here?

Interestingly, July saw 1607 Trustee's Deeds (indicating repossession or consummated trustee auction) and 3809 sales. I'm no math wiz but that seems like about 2.4 sales per consummated foreclosure.

Also, I am seeing 3543 NOD's for July. That seems like less than sales.

Submitted by Rich Toscano on August 30, 2009 - 8:16pm.

In the context of these charts I am talking about homes in foreclosure, which may or may not end up as inventory down the road. I used NOD's, when they officially enter the foreclosure process, because it's less volatile and more leading than NOT's: http://piggington.com/home_sales_per_tru...

Re. the 3809 sales, that figure includes new homes, which I don't think should be included because I am trying to compare the number of existing homes that go into foreclosure with the number of existing homes that are sold. In any case the whole data series is based on just existing home sales, so it's consistent for comparative purposes.

Rich

Submitted by jpinpb on August 30, 2009 - 9:27pm.

I have to say, with all the behind the scenes manipulations, the moratoriums, the bribery (8K), withholding of listings, etc, as contrived as all that is, I expected better than just a gnat's eyelash, particularly w/the optimists calling bottom and green shoots and media babble. They were making it sound like we were out of the woods. All the government's almost forcing a recovery and we barely get one-to-one.

Submitted by lubenthrust on September 1, 2009 - 12:31pm.

Rich, thank you for your hard work. As a layperson, I definitely appreciate your insight, but more importantly, I try to understand the motivation behind each analysis. (Insert wise comment here about the importance of learning how to fish versus being gifted with fish)

So I have some (probably stupid) questions for you: What is the reasoning behind comparing existing home foreclosures to existing home sales? Is this truly a useful comparison? If the goal is to evaluate the contribution to oversupply, wouldn't it make more sense to compare foreclosures + new home construction to sales of existing homes + new (no previous owner) homes?

As an extreme example, consider a month where 1000 existing homes go into foreclosure and 0 new homes are built, but there are 1000 new (no previous owner) sales and 0 existing home sales. This would certainly look dire from the perspective of only existing supply/demand, but not bad at all when considering total supply/demand.

Submitted by Rich Toscano on September 1, 2009 - 12:58pm.

The idea is that it is a proxy for how much demand there is in comparison to must-sell supply. You could argue that new homes are must sell too, but i don't have data on new home inventory and anyway I think the new home market is the tail on the dog -- the resale market is far, far bigger.

That's the theory. In practice, you can see from the first and second graph that big turns in the sales-per-default ratio have preceded big turns in price, so empirically there is some evidence that this is worth looking at.

rich

Submitted by urbanrealtor on September 1, 2009 - 9:41pm.

Rich Toscano wrote:
The idea is that it is a proxy for how much demand there is in comparison to must-sell supply. You could argue that new homes are must sell too, but i don't have data on new home inventory and anyway I think the new home market is the tail on the dog -- the resale market is far, far bigger.

That's the theory. In practice, you can see from the first and second graph that big turns in the sales-per-default ratio have preceded big turns in price, so empirically there is some evidence that this is worth looking at.

rich


This explanation makes me even more uncomfortable with nod-per-sale as a metric.
Can you do a graph of td's per sale?
Less leading but, I suspect, a lot more accurate.
Could we do that?

(or is this the part where you tell me to get my own blog?)

I really do think it would be good.

Submitted by Rich Toscano on September 1, 2009 - 10:34pm.

Actually this is the part where I tell you to click the link in my first reply to you. :-)

Submitted by urbanrealtor on September 2, 2009 - 10:11am.

Rich Toscano wrote:
Actually this is the part where I tell you to click the link in my first reply to you. :-)

Except that NOT's (what you measured) are not trustee sales or trustee deeds.

Trustee sales get cancelled more than 50% of the time.
Okay that number is anecdotal but I am pretty confident in it based on my experience in negotiating them.

Trustee deeds are the only reliable metric for actual completed trustee sales and repossessions.

NOT's are essentially just a second NOD.

Is there some other link where you address trustee deeds?

Submitted by Rich Toscano on September 2, 2009 - 10:25am.

Sorry, those are Trustee Deed's, I had them mislabeled.

Rich

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