Rough crowd. I am here to take all your punlishment.
First of all I dont have CRT monitors and haven’t for years if that even matters. Kind of trivial criticism dont ya think.
I am out of town with my family so would like to jump back in here on Monday but until then here are some data for you.
San Diego County Data – Trends are all higher
NOTICE OF DEAULT
may 1-18 2410 (at record pace)
apr 3523
45119 (statewide for april)
mar 3121
feb 2977
jan 3286
dec 2753
nov 1578
25702 (statewide for nov)
SOLD TO BANK
may 1-18 1232 (at record pace)
apr 1646
22443 (statewide for april)
mar 1106
feb 1220
jan 1581
dec 1075
nov 781
11978 (statewide for nov)
CURRENT FORECLOSURE AUCTIONS
may 1-18 1963 (record pace)
apr 2593
30293 (statewide for april)
mar 1991
feb 1168
jan 1841
dec 1661
nov 1352
18314 (statewide for april)
DataQuick Sales data below. I use DQ because they are very reliable in sales and REO as a % of sales so I use their median home price figures as well. They capture the entire market. I am a total Case-Schiller fan as well.
SDC is experiencing the same foreclosure activity as most other counties that were the most bubbly. Right now their Notices of Default are surging and 75-80% of them are not being cured and going back to the bank. These numbers are a fact. A year ago, many more were cured or purchased from 3rd parties at the action auction, now 98% go back to the bank.
The big numbers of REO as a part of total sales are coming from the bank inventory through large auction aggregators such as REDC and from what they sell through realtors.
In san Diego County “Of all the homes that resold in April, 37.5 percent had been foreclosed on at some point in the prior 12 months, compared with a revised 35.8 percent in March and 4.6 percent a year ago. Across the six-county area, “foreclosure resales” ranged from 26.9 percent of resale activity in Orange County to 52.7 percent in Riverside County.”
Bank REO is the killer guys. It is coming and coming hard. In Jan – Apr we had 163k Notices of Default, which will turn in to 122k REO in the next four months if the 98% NOD to REO figure that has held true for many months holds true in the future. CA only sold 31,150 homes total last month. Since we already know what REO will do for the next four months, sales better pick up.
There are so many question we have yet to answer this Spring Summer with no exotic loan programs, seconds etc.
This is CA’s first real test of the mortgage/housing implosion. Our market has not been been stress tested in 6 years with no exotics, potential home owners not being able to sell their home in order to raise capital for a downpayment on the new one, having to put out actual savings downpayment etc.
Buyers maybe stepping in to buy the REO as you can see above in the DQ data, but back that out and organic sales is a disaster. People are not selling homes to each other.
When it comes to my 4.25 year prediction…that is of course if everything were to continue on the same path as now and we know that will not happen. What will happen is a total unknown. Perhaps the Govt will do an across the board principal reduction and the problem will be greatly diminished – who knows.
Nobody knows what the true REO is or what future foreclosure supply will be. All we know now is that foreclosure are surging and sales are still far below the past serveral years. If all were to reman constant, we would have 4.25 years supply. 16 months ago 3300 units per month were going back to the bank. In April, 22300. That is significant.
So, we stand at a 360k NOD annual REO run given the past four months numbers. That may increase. Also, the sales may very well decrease as they typically do according to seasons. Right now we are at a 250k run rate for 2008.
Foreclosure supply is not infinite therefore counting a months supply as I have done of 4.25 years is likely incorrect. It could be longer, it could be shorter. What happens is rates shoot up to 15% due to a hyperinflationary effect brought upon by the crashing dollar and surging commodities prices. There are so many wildcards but it is a good example of the problem.
A ‘retun to normal’ will not happen anytime soon and will not happen until values fall much more. Markets overdo things to both sides so it is safe to assume it will overdo it to the downside as well. Looking into the future, it is so tough to predict anything I kept coming back to the here and now with my analysis. The here and now is as ugly as it gets. -Best, Mr Mortgage
