Distress comparison of 2 neighborhoods

[SD Realtor]

I thought it would an interesting exercise to compare two neighborhoods to look at their level of distress. I chose 91913 and 92009 to look at the difference in the distress ratio of active listings.

Now in order to identify distress properties I did a string search for the following words;

reo, bank, foreclosure, foreclosed, lender, corporate

First I did a search for these strings in the remarks section and then I did them in the confidential remarks section. I then did a search in both sections at once to throw out duplicates.

For 91913 the results are as follows:

Total detached homes active for sale: 314

Total homes that lender owned search: 38

Total homes that had “short” in remarks: 21

**********

For 92009 the results are as follows:

Total detached homes active for sale: 207

Total homes that “hit: lender owner search: 3

Total homes that had “short” in remarks: 0

**********************

I think this is a staggering example to people out there including myself that shows the disparity between the distress with respect to desireability. Yes we all know that there are many many foreclosures out there. However I think that this variance will continue to hold for many zip codes. I think over time we will see distress creep into many many areas.

Also what is important is this is a simple one time snapshot of current active listings on the MLS. We all know there ARE foreclosures everywhere including La Jolla and other much desired areas. However the ratio of REO to normal active listings in these desireable areas varies widely.

The key word here is patience guys.

[temeculaguy]

I think buying into an area that has held up thus far is far worse than one which is playing out. Ultimately it will trickle up but as it holds the disparity increases and creates a greater loss potential. If zip code A is traditionally worth double zip code B but zip code A is holding even and zip code B falls 25%, the worst investment today is zip code A. Despite the desirablility the multoples are getting out of whack and will eventually come in line.

BTW and off topic, now that the patriots have been caught cheating in the first game and are awaiting sanctions, who has last years playoff game still on tivo and will we find the mystery video guy/assistant coach decoding charger defensive calls on that tape. It’s going to be the “grassy knoll” of our time. I want every scrap of film analyzed from the past seasons, I want asterisks in the record books, I want rings taken back. How will this affect Sunday when the Chargers play the Cheaters. LT is going to go off Sunday and after the game he is going to mention to a reporter on the sideline that the Cheaters, cheated him out of his shot at the superbowl last year. My prediction, Brady gets a season ending “theisman like” injury at the hands of the Shawns and Belechick is arrested in a nightclub/stripclub scuffle/gunplay incident. They f&*#%@ with Karma and she f*&$#%’s back.

[SD Realtor]

Good to hear back from you. The patsies scare me… Moss, Stallworth and Welker make that receiver corps scary scary good. Meanwhile we put gates out as our second receiver last week. Not sure why floyd was not in on as many plays as I would have hoped…. I think patsies cover easy next week unless we get serious pressure on Brady…

As for your theory about not wanting to play in neighborhoods that have not run down yet… it may have merit. It depends on how far down you think those neighborhoods will run. The point of the post is to try to calibrate people with respect to the timeframes that I think we need to realize in order for this to play out like we want, where we want.

SD Realtor

[an]

My theory is that older and desirable areas won’t be pull down by distress sales, but more of calibration to the other area in the county that people cross shop it with. Every area will have people wanting to sell. But people areas like Cardiff, Solana Beach, etc, can choose not to sell. So there won’t be too much distress sale to drastically pull down the price. However, it has x% premium over 4S, Carmel Valley, La Costa, Scripps Ranch, etc. When those newer areas drop due to distress sales because there were more speculations, etc. Eventually, buyers might dry up for Cardiff/Solana Beach to a point where the few distress seller might make a different in price. That’s why I think area like Cardiff/Solana Beach might have a semi-soft landing?

[Raybyrnes]

Warren Buffet never went bottom feeding for a reason. During the worst period of real estate history La Jolla, Del Mar, Coronado seems to weather the downturn fairly wellrelative to the rest of the neighboring areas.

Maybe another way of looking at it is this. Would you currently want to by a sub prime loan or would you accept less return for AAA rated paper?

[FoamFinger1]

If the banks continue to hold property the distress levels will be delayed. Think of how many ways they can push the reo’s off balance sheet for more time. (start another shell company? Brown Lawn, Inc.) but then again the crazy financing that created this mess was justified and continued for over four years. So yes, much patience is needed here.

[Bugs]

“Relatively well” is not a code word for “immune” or “avoid”. The pricing in Del Mar and La Jolla is where it is because of their relationship with the rest of the region. If the entire region gets cut with the 50% knife the primo areas will get cut with a smaller knife, but it will still get cut. Their overall price relationship with the region is a lot more likely to compress than expand.

[SD Realtor]

Once again, the post was not to provide an argument over whether prime areas will get cut, or by how much they will get cut.

Seems to me that we always see posts by people complaining that prices are not dropping in the neighborhoods they are looking. Then there are the infamous, “how much do you think the market will drop posts”… Then there are the invariable posts, foreclosures are up 500% so get ready for the big chunk down hype…

Again, I am just trying to provide some data that is showing that the distress will affect different areas at different rates. Maybe 4S will drop 20% in a month… I don’t know. I can say with confidence though that foreclosure rates and distress vary SUBSTANTIALLY throughout the county. That people who are searching for housing in the more desireable locations may want to calibrate their timeframes on when they think these desireable areas will become affordable or at least more affordable.

The argument is not about price compression it is about the temporal rate of that compression. I think sometimes there are posts that are way to hopeful/optimistic about the rate and magnitudes of the drops in the desireable regions. I think they will happen but it will take awhile.

SD Realtor

[gn]

Distressed properties in 91913 (Chula Vista).

[img_assist|nid=4760|title=91913|desc=|link=node|align=left|width=466|height=400]

[gn]

Distressed properties in 92009 (Carlsbad).

[img_assist|nid=4762|title=92009|desc=|link=node|align=left|width=466|height=396]

[SD Realtor]

gn –

Please read the parameters of how I performed the search. What I used was the MLS and it was only for detached homes using the strings I presented. There may indeed be many more distressed condos and/or detached homes that are not on the MLS. I only go by the data I presented.

Have you parsed through the Carlsbad data to see which homes are condos? The other thing that is troubling to me is I sent some email to Realtytrac which is indicative of these third party providers and I was never sent a response.

My question was, when there is a NOD or NOT that has been recorded but not cured, when is that NOD or NOT removed from your statistics. Well they never got back to me on that.

Does anyone have any idea?

Finally, if you want to provide me with the addresses of the REO properties from the graph above I will be more then happy to do a lookup to see how recent the REO is.

Realtor

[cyphire]

We haven’t had a recession yet, we have only seen the froth come out of the real estate market. Prices were still jumping like crazy in 2005, 2006 still had lots of high prices paid, 2007 has been a bust, but the level of transactions has dimmed, there are huge numbers of homes which were pulled, are not going on the market, despite it making economic sense for the seller, etc.

I think the problem is that we haven’t really had a downturn in real estate, just a quick reversal of the excesses. The rats are still in the ship, the ship is taking on water but the rats haven’t fled. It took years and years of price increases to fuel the insanity which has become the housing market here in San Diego (and California and to a much lesser extent the US).

[img_assist|nid=4763|title=housing costs as a percentage of wages|desc=|link=node|align=left|width=466|height=466]

Hey folks… This is the AVERAGE! It includes all the these people have lived in their home for years…. It is the average for the state. The number of people who pay 50% is huge as well. So for each dollar earned, there are lots of people out there paying .40 cents of it on housing. This is unsustainable

When prices went up, and up, and up, the market turned over, people cashed out and left, others picked up the high costs. We are now experiencing a huge shift in employment and there are no places to pick up that employment.

The Fed is claiming a 1 in 3 chance of recession. They are always wrong to the optimistic side. Most of the markets believe that the number is 1 in 2. The folks with a real understanding of risk think it is inevitable.

We will look back at this period and laugh (or cry). The risk has just been shifted with lots of the players jumping ship. The mortgage brokers, banks, wall street, Realtors, construction companies, and all the ancillary businesses have just realized that the game is over. The economy is just starting to shift from it. Inflation is out of control (but not according to the government). Health care, oil, commodities (milk & wheat especially) are raising like crazy. Our engine is sputtering, the world is replacing our growth vehicle, and they will suffer along with us, but prices are high, job prospects are low, and the housing market will go down accordingly.

To go back to the original point. Did I have an original point?! It will take years of unwinding, huge job losses, a recession, pricing pressures, and an unwinding of the US dominance in many markets.

Not the least of our problems:
– A hugely expensive war which shows no signs of letting down.
– Recession in jobs and wages.
– Housing costs which will have to deflate significantly and will keep a huge brake against the ability to get out of recession.
– A negative savings rate (it’s only the savings of Asia which has propped us up so far – it is unsustainable) as per the Fed.
– Loss of manufacturing base.

As it gets worse, and it will get worse, the way our society is set up will accelerate the pain for the vast portion of our society. Just as in the depression, the folks with real money will hunker down, and the others will starve. It’s called capitalism and while we have all been taught that it is the best system, it really is the best system for the folks with significant money, and brutal for most others.

During the excessive downturn the following will happen:
– Our farmers will ship goods to where they can maximize profits.
– Our jobs will be / have been outsourced for the 5% of our population’s benefit.
– Job security which has never been strong will be non-existant.
– Wage deflation will be rampant along with downsizing.
– Our politicians support the wealthy vs. the middle class / lower class.
– The world will move to a better hedge than the US economy, while it suffers as well.

Oh well – sorry for the rant. I have to go to the gym now, personal defense and strong muscles will be critical for the bad times!!! Hope I’m just kidding!

[gn]

SD Realtor,

My earlier posts were not meant to disagree with your post.

I was merely trying to give a graphic representation. To many people, it’s easier to grasp the situation if they can visualize it.

[SD Realtor]

Hi gn –

I understand what you are saying. I think the biggest thing that is misunderstood is the NOD/NOT reporting. I think that if anything people should give the most creedence to the REO numbers because those are absolute. NOD/NOT curing however is still a pretty high percentage and when that happens there are no statistics that ever get adjusted.

Similarly the type of housing is important, I wish the NOD/NOT/REO reporting was parsed to housing type as well.

SD Realtor

[kewp]

Cyphire,

Thats a little too doom and gloom for me.

You missed a few things, notably, a collapsing dollar. Say it loses 50% of its value in the world market.

Fine, imports are twice as expensive. So are our exports, fixing our trade imbalance. Businesses and their employees working in the global market are going to do great. So are local businesses supporting them.

True, the heartland is going to be ripped to shreds (already happening in Detroit); but this is going to have a very important consequence. Millions of angry, unemployed lower class folks that are going to have no problem making the 4pm cutoff for the voting booth. They are going to rally behind whomever offers them New Deal 2.0.

Then the 70 year cycle starts anew!

[Author]

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