Thursday, October 16th, 2008 at 7:17 AM
Close to Halfway?
To their credit, C.A.R. did publish the Credit Suisse ARM-reset chart in their massive 134-page forecast presentation. They also included a breakdown by county of the number of subprime and Alt-A mortgages – here is the review of San Diego County:
| Mortgage Type | # of loans | Already reset | 2008 reset | 2009 reset | 2010+ reset |
| Subprime ARM | 21,500 | ||||
| Alt-A ARMs | 39,700 |
They didn’t define the statistics or offer an analysis, they were just lumped into a category ‘From Subprime to Credit Crisis’. We’ll assume that the Alt-A loans include interest-only and option-arms.
We still have 34,553 loans to reset in 2008 and beyond, which is 56.5% of the total of subprime and Alt-A mortgages in San Diego County.
We had 26,647 loans adjust prior to 2008, and we’ll end up somewhere around 20,000 foreclosures in 2008 in San Diego County, about 75% of those that have reset.
Unless the loan modifications and other gimmicks work, it looks like we’re heading for approximately 25,915 MORE foreclosures.
(using the same guesstimate of 75% x 34,553 loans resetting in 2008 and beyond).
One more interesting note:
The SD County median sales price peaked in May 2006 at $622,380. In August, 2008 it was $375,090, a 39.7% decline.
For the entire 134-page C.A.R. presentation, Click here
The subprime and Alt-A charts by county are pages 55 and 56.
Posted on Thursday, October 16th, 2008 at 7:17 AM in Forecasts | 9 Comments » | 
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Jim, how many SD county foreclosures have we had already? It would help put the “26k more foreclosures” number into perspective.
Also, did the analysis include any breakdown by market tier? I assume that most subprime foreclosures have been in the bottom third of the market. However, my understanding is that most of the Alt-A’s will be in the top and middle thirds of the market. Of the SD county foreclosures so far, is it known approximately how many are in each tier? I’m thinking that if the top tier has only had 10% of the foreclosures so far, but will get 50% of the new 26k foreclosures, it would have a huge effect. Any such effect would be multiplied by the fact that the dollar loss per foreclosure in the top tier is much more than in the bottom tier.
Dwip | October 16th, 2008 at 9:34 amWe’ve had 15,738 foreclosures YTD through Septemeber 30th, plus 8,416 in 2007, a total of 24,154 foreclosures in the last 21 months.
Would agree that the majority of subprime loans are on the lower-end, and that we could see thousands of more foreclosures on the high end.
Unless they tweak/waive the neg-am recasts.
You know the government is going to keep tinkering with this……
Jim the Realtor | October 16th, 2008 at 10:06 amMay be OT a bit, but while we’re talking about interest rates, the Unintended Consequences of the Bailout may be starting with a spike in Interest Rates.
CNN Article.
SD_Coastal | October 16th, 2008 at 10:14 amWhat about HELOC’s?!?!
Also.. the farther the market goes down, the harder those future resets will be.
Someone will be taking a major loss on all those ‘assets.’ The question is whether it will be the tax payers or the banks.
E-leven | October 16th, 2008 at 11:00 amJim those are “first” resets. Most continue to reset on 6 month or annual schedules.
Rob Dawg | October 16th, 2008 at 11:25 amSadly, for all those people waiting for the nicer areas to start coming down in price. It looks like there is at least another year before a large portion of the resets start kicking in… then throw in another year of waiting for the foreclosure process, etc.
Anonymous | October 16th, 2008 at 1:08 pmAre there any stats for what percentage of foreclosed or NOD properties are/were owner occupied vs “investor owned?” I know there were probably a lot of loans written to people stating they’d be occupying when they never intended to, but was just wondering if there is any way of knowing.
GeneK | October 16th, 2008 at 2:15 pmWhat if the impact of foreclosures and resets are over-stated, in general?
During the boom, many people were using HELOCs and cash-out refis as a way to earn a third income. The house often became the primary “earner” in the family — as people took $50K-$100K **per year** in additional mortgage debt. Many of these people would have defaulted during the boom, except they kept taking on more debt to cover their existing debt. That source of additional credit/debt is now closed, yet the FBs now have debt which is 2-5X++ higher than their original debt from before the credit bubble (which went hyperbolic, beginning in 2001).
It’s not foreclosures that cause falling prices, but falling prices that cause foreclosures, IMHO. People who would have defaulted were able to sell their houses or take on more debt to buy themselves some time before the inevitable happened (foreclosure), as long as prices were going up. Naturally, abandoned and neglected homes DO cause neighborhood prices to decline, and that is why banks should be forced to get those homes back on the market **and sold** as soon as possible.
What affects prices more than anything else are future buyers and their willingness and ability to buy. Monkeying around with interest rates and loan durations is just masking the cracks underneath, it does nothing to **fix the problem** of too much debt/too high prices.
The longer they try to push off the inevitable, the more resources will be wasted — at the very time we will need those resources to help alleviate the side-effects of the deflation/debt destruction (job programs and deposit insurance).
People can handle 6-12 months of unemployment, but they cannot handle 6-12 years. We need to **fix the problem** quickly and efficiently by letting prices of all assets decline to a point where normal working people can afford to pay without taking on overwhelming debt. They are doing the very opposite, which will end up causing far more damage.
CA renter | October 16th, 2008 at 3:17 pmIs it just me or is a 75% failure rate not shocking to anyone anymore?
I thought the failure rates were something like 15% on subprimes with the ALT-As already failing at a higher rate (and many resetting faster than the Credit Suisse schedule). But I had no idea that such a high percentage were actually failing.
What is the basis for this number? Yikes!
shoppingaround | October 18th, 2008 at 7:43 am