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The Dataquick stats are out for May, 2008.

When buyers used to see a 5% to 10% drop in prices from the previous month, they would expect the trend to continue, and apply a similar hit to their offers made this month or next.

When they are seeing hits of this magnitude, they’ll probably either make future offers painfully low for sellers, or suspend their efforts altogether. 

There might be 30 days left for sellers to be able to sell this year for a decent price – though much lower than they expected.  But when you see both sales and prices in negative territory, it’s only going to continue.

Quotes from Dataquick:

La Jolla, CA— Bargain shoppers helped push Southern California home sales higher in May compared with April – a normal, seasonal lift – but it was still the slowest May in more than 20 years. The median price paid fell a record 27 percent from a year ago, the result of sluggish high-end sales, more sellers dropping their asking prices and lenders selling off more of their aggressively priced, repossessed homes.

Although last month’s sales total was the highest for any month since August 2007, when 17,755 homes sold, it was still the lowest for a May in DataQuick’s statistics, which go back to 1988. Last month was also 36.5 percent lower than the May average of 26,637 sales.

Sales of post-foreclosure homes continue to dominate many inland markets. Of all the Southland homes that resold in May, 37.4 percent had been foreclosed on at some point in the prior 12 months, compared with a revised 36.2 percent in April and 5.5 percent one year ago. Across the six-county area, these "foreclosure resales" ranged from 25.6 percent of resale activity in Orange County to 56.6 percent in Riverside County.

Among all Southland resales in May, about 42 percent of homes sold for less than their prior sale price – about 34 percent less, on average, based on an analysis of sales where a full May 2008 and prior sale price were in the public record. Most of the prior sales occurred between early 2004 and mid 2006.

The median sales price has dropped mainly for two reasons: depreciation, especially in inland markets, and the sharp drop off in the past nine months of home sales financed with jumbo mortgages, previously defined as over $417,000. Before the credit crunch hit in August 2007, making jumbos pricier and harder to obtain, nearly 40 percent of Southland sales were financed with them. Last month jumbos accounted for just 15.8 percent of sales, up from 15.1 percent in April.

Indicators of market distress continue to move in different directions. Foreclosure activity is at record levels, financing with adjustable-rate mortgages is at a six-year low. Down payment sizes and flipping rates are stable, non-owner occupied buying activity has risen, DataQuick reported.

Remember this listing?  It was that 1,800sf short sale in Escondido that I had listed in Novemebr for $419,900.

There were two full-price offers, but neither buyer could wait for the bank to get around to processing the short-sale request.

We lowered the price to $399,000, and had another good offer, but we couldn’t get their attention on this one either.  Buyer boogied.

Down to $379,000 and had another full-price offer, and by the time the bank got around to reviewing the full financial package from the sellers, they decided that the documents were too old and instead foreclosed on April 29th.

Now it’s listed as an REO for $354,500, and is unsold.

Another indicator to keep an eye out for is if we ever see these short sales getting processed expeditiously – that’s when we’ll know the banks are feeling the heat from upper management about the future.  If they were just worried about getting the most money for the beneficiary, they’d be finding a way to close short sales promptly.

The way they handle these, they have to be either waiting for the big bailout, or looking to make the additional fees from foreclosure/REO selling, and/or just don’t give a hoot.  The beneficiary could have ended up with $65,000 more, if only the servicer could have closed the short sale last year.

The fourth of the REOs assigned to me hit the open market, and it should be a good test of the 92057 zip code.  We’ve seen the lower-end properties take a bath recently in this zip, with most suffering 40% to 60% declines.  What happens once you move up the price ladder? 

This house is in the Jeffries Ranch area in rural east Oceanside, where house trails run right through your front yard!  It sold just 15 months ago for $700,000, and the same floor plan across the street with a big pool is in escrow currently, listed for $669,000.

Our price?  $549,000.

1488 Serene, Oceanside, CA 92057

4 br + office/ 3 bath

2,963 sf

3-car garage + RV pkg

10,500 sf lot

YB: 2000  HOA = 0, MR = 0

Hope everyone has been enjoying the U.S. Open, looking for a big finish today! 

Yesterday we mentioned the dominance of REOs and short sales in the 92057 zip code of Oceanside. These are the specific numbers for detached and attached homes under $275,000 (‘Regular’ means the sellers appear to have equity):

If you are trying to short-sell and are serious about getting out, drop your price 20% today. What do you have to lose?

This condo is the third property in my REO group to hit the market:

428 Parkside Dr., Oceanside, CA 92054

2 br/1 ba  1,017 sf

YB: 1972

HOA = $250/month

It has a storied sales history too:

4/01 – $123,000

11/03 – $215,000

10/05 – $310,000  (foreclosed)

1/07 -   $250,000 (foreclosed)

6/08 -  $153,900 list price

Any resemblance to a Bell curve is purely coincidental…..

Mark in SD posted this link on BMIT about the credit crunch, and how banks are tightening their underwriting guidelines across the board – from mortgages to credit cards:

http://www.mcclatchydc.com/227/story/40246.html

This house is a good example – it’s on Ditmar in South Oceanside in an area that we call ‘Baja Carlsbad’ because of it’s proximity to downtown Carlsbad about a mile away.  It is a typical 1950s-style bungalow that has been expanded and remodeled over the years.  Most thought it was tastefully redone, and a cool house, but hard to justify the price due to the lack of sales lately.  There haven’t been many closings in South Oceanside this year in any price range.

I had it listed for $699,000 in February, and though everybody who saw it, loved it, we only had one offer that was contingent on their previous house selling, and that ended up falling through.

Around the 1st of May an agent submitted an offer for $650,000, and said it was all his buyers were going to pay.  With the lack of comps available, and the need for the out-of-country sellers to close this deal, it sounded like a reasonable proposition.

But the sellers were tight on equity – their loan was $620,000+.

Somebody had to budge.  But the sellers didn’t have the dough, the buyers wouldn’t come up on price, and the buyer’s agent wouldn’t move off his 3% commission that was offered in the MLS.  Do I do something, or let it crash and burn?

I stepped out of the deal.  What use is it to let the deal fall apart?  We had tested the market for three months, and it was clear no other buyers were going to come along and pay more, so I was going to end up with nothing either way.  I might as well get out of the way and let the deal happen, and maybe down the road something good will happen out of it.  I could have carried a note for the commission, but I’m not a collector – if the sellers can send me a check someday, great, or get the other agent to throw a referral fee my way, terrific.

I sent over all of the signed disclosures too, so the buyer’s agent had a pretty easy road to the finish line, if he could get an appraisal to come in right.

But the rest of the story shows how tight/nervous/conservative lenders are getting.

The appraisal comes in at $615,000, a fairly significant $35,000 short of the purchase price.  The buyers planned for a 20% down payment, but thankfully they had some extra dough, so they agreed to bring in the difference in cash.  So now it’s up to a little over 25% down payment.

They sign loan docs, and the lender funded the loan – which means they wired the money to the title company.

But then the underwriter double-clutches, and decides that they need AN ADDITIONAL 5% down payment, bringing it to over 30% down.  They insist that the first funding gets wired back to them, and the buyers bring in another $32,500, sign docs again, and it finally closed last week.

For those of you who are contemplating waiting until next year to sell – re-examine what you are up against.  If you are in an area where prices could miraculously hold up, consider that the lenders are  nervous, and their additional demands will further shrink the buyer pool – not many buyers would have done, or could have done, what these buyers did. 

If you’re selling, get ‘er done!  In fact, if you think you might wait until next year, even if it means having to take a little less, you might as well lower your price today and get it over with!

(I heard this story from the other agent, who did say he’s going to send me a check)

We’ve been following the same four realtors who specialize in REO sales – here’s an update on their sales of houses and condos:

Jun 11 – 328 Actives/98 Pendings = 3.35

Aug 21 – 382 Actives/111 Pendings = 3.44

Sep 20 – 425 Actives/97 Pendings = 4.38

Nov 9 -  486 Actives/128 Pendings = 3.80

Nov 25 – 484 Actives/138 Pendings = 3.51

Dec 14 – 446 Actives/147 Pendings = 3.03

Jan 15 – 474 Actives/149 Pendings = 3.18

Feb 7 -   482 Actives/187 Pendings = 2.57

Mar 13 – 477 Actives/205 Pendings = 2.33

Apr 18 – 467 Actives/247 Pendings = 1.89

May 13 – 418 Actives/298 Pendings = 1.40

June 10 – 344 Actives/288 Pendings = 1.19

The same four agents have closed 624 transactions year-to-date. 

(They closed 763 in 2007)

Their active inventory has dropped considerably, but that could be due to the MLS debacle as much as anything.  But it wouldn’t surprise me to see the REO market grind to a halt.  All participants must be beyond peak capacity, and until servicers are willing to hire more people or streamline the process, I don’t think we’ll see additional production – these agents are already looking at doubling their closings this year compared to 2007.

Are banks holding back from foreclosing, or selling their REO inventory?

Only those who work on the inside know for sure, but here’s some anecdotal evidence to consider. 

On April 22nd I started receiving emails from Countrywide regarding their REO properties.  They were in the ‘pre-listing’ stage, which includes duties that I don’t normally handle:

1. Getting occupants to vacate

2. Coordinate repairs

3. Pay for utilities

Getting occupants to vacate the premises includes the cash-for-keys program, where Countrywide will offer to pay $2,500 to occupants who move and clean in two weeks.  It is a generous program if you ask me, they can deliver a three-day notice to vacate to any former owner (tenants get a minimum 30 days), yet they are willing to give then two weeks and $2,500?  They don’t offer it to everyone, and it seems haphazard as to who gets it, but it doesn’t sound like evidence from a company that is looking to hold back on selling the properties.

Speaking of holding back, the properties assigned to me were all foreclosed just a few days before – and I thought, "yippee, these guys are really on it!"  That thought was a bit premature.

Since the end of April when I had 20 properties sent to me, only three have made it to market.  Another one got rescinded (stand-by, this one will be a story in itself) and three others have extenuating circumstances why they have stalled.  But literally the other 13 are sitting vacant, waiting for Countrywide’s asset managers to give me the green light to put them on the market.

I think they are overwhelmed – there have 60 asset managers at their servicing facility in Simi Valley, each with 100+ files on their desk.  The majority of these mortgages are ones they sold to Deutsche Bank and HSBC, both foreign entities.  Countrywide is just their servicing agent, meaning they collect the monthly payments, and handle the foreclosure proceedings.  There isn’t much incentive for them to not be expediting the sales, unless the banks that actually own the properties are telling them to stall.  But why would Deutsche Bank or HSBC want to stall – they can’t be waiting for a bailout, who is going to give them a hand?  The U.S. Government?  No way.

A large part of the overwhelm is from the old-fashioned processing.  When I put the Oceanside half-duplex on the market and received seven offers, the Countrywide asset manager addressed each one, which meant she had to print out our 12-page offer form, add their 17-pager, and then sign each by hand. 

That’s a total of 203 pages for initials or signatures, then re-scan them, and upload them back onto the website where I can access them.  If you are great at your job, that would still take you an hour or two to process – no surprise that they are buried.

To compound their problems, the market is hot for REO listings.  They are probably getting dozens of offers every day that need attention.  Yet in my Oceanside case they made it a point to formally answer every offer in writing – even the low ones that I told her had no chance (the agents who told me they wouldn’t change their offer when we countered requesting highest-and-best).

Once we got the first one into escrow, the closing process has been pretty smooth.  The problem seems to be the lack of proper staffing to handle the workload in getting the properties from trustee sale to accepted offer. 

Take today for an example – early this morning I emailed each asset manager on every property I have ready to go to market, encouraging them to take action.  I didn’t get one return email all day.

When I first got my list of twenty properties in the span of about ten days, I thought,  "Golly, I’d like to sell 20 of these every month!"  Now I’m just wondering if I can get this group done by the end of summer.

There will still be a few more late-reporters for the 2008 stats, given the Tempo5 debacle, but here’s the preliminary numbers for detached homes in May, year-over-year, ranked by how they did price-wise (MSP = Median Sales Price):

Only a couple of surprises – the sales in South Carlsbad took a beating, dropping 35% in 92009, and 68% in 92011 – probably a sign of those still holding out? Poway coming in dead last on pricing probably isn’t that big of a deal – the high-end has gone stagnant, while the lower-end has seen foreclosures rolling through. Of the 27 sales last month, five were REOs, and three were short sales, but they were all under $600,000.

I have tickets for the US Open practice rounds for tomorrow and Wednesday, if anyone can use them – let me know!

I’ll get into my Sandicor rant down below, but first here is the graph showing monthly sales of houses and condos (in purple) with the average dollars-per-sf (in red). 

I added a zero to the $-per-sf measurements to superimpose the line on top of the number-of-sales.

You can see that a point of capitulation was finally hit in October/November, during a six-month skid in sales.  The average $/sf had been running around $350/sf, and now it’s dropped down around $300/sf.  This lower pricing has probably helped the April and May sales rebound somewhat, but don’t be surprised if we’re in for another long, cold winter.

The Tempo5 got put to the test in calculating the $-per-sf.  This new version of the MLS still doesn’t allow for checking the median prices, and they don’t list them anywhere.  They do include a ‘statistics’ button, which shows the average sales price, the average square footage, and the average $-per-sf.  Easy enough, right?  Just program a simple equation of A divided by B equals C.  The new Tempo 5 miscalulates it every time, and it is way off, 5% to 10% in either direction.  I calculated these on the graph above manually.

If they can’t get simple programming right, and don’t bother to check it for accuracy, how can we count on anything they do?  Yet their arrogance continues - today I received this email, urging realtors to improve their skills as the answer:

"NSDCAR staff would like to thank you for your continued patience during the implementation of Sandicor’s upgrade to Tempo 5.0.

Elevate your skills and understanding of the tools of your trade… register for Tempo Training now!"