For the first time in years, a guy who quantifies the foreclosure crisis got to report some good news. Kyle Lundstedt’s colleagues at LPS Applied Analytics call him Dr. Doom, as he calculates all the numbers for the monthly Mortgage Monitor Report.
But this month he got to report a drop in mortgage delinquencies, down more than 11 percent month-over month, to the lowest level since 2008.
“We’re starting to see that there are a lot of folks who are still hanging in there,” says Lundstedt. “The population is a better credit quality population.”
The subprimes, Alt-A’s, the bad lending of the housing boom, have largely moved through the system already, not to mention that big banks and servicers are getting far more aggressive with loan modifications. One quarter of the loans that were more than 90 days delinquent last year are now current. That’s not to say they will all stay current, but that’s a good sign.
Unfortunately, that’s all Dr. Doom could muster on the bright side: “It’s progress; it’s not game-changing.” That’s because the foreclosure pipeline, that is loans 90+ days delinquent or in the foreclosure process, is enormous.
Foreclosure inventory is at a new all-time high. There are so many loans still waiting to go into foreclosure…in fact the total number of loans 90+ delinquent is 45 times the size of the current monthly foreclosure sale number. 45 times!
Larry Summers, one-time director of President Barack Obama’s National Economic Council, believes the economy is recovering, albeit not as fast in some areas as desired, but enough to forestall a double dip.
“There is no longer any talk of a depression,” he told journalists at a Lincoln Institute of Land Policy seminar in Cambridge, Mass., over the weekend. “Now, there’s very little talk of a double dip.”
He pointed out that the economy has grown for seven straight quarters and the unemployment rate has fallen.
“The stock market has had the best two-year run since the beginning of the 20th century,” he said. He also said corporate profits are best in any two-year period since World War II.
But he acknowledged things are not improving fast enough.
“To be sure, we have a huge concern that the recovery is not nearly as rapid as we would like,” he said. “The housing sector remains extraordinarily weak. The nation’s long-term debt situation is not where it should be. There have been major steps in financial regulation but we can’t be certain we will avoid another financial crisis.
“But the catastrophe that could have been averted has been averted , and I think it has been averted with a combination of the right diagnosis, determined effort to act on that diagnosis, a good deal of luck and an important change in psychology.”
Summers, who served in the administration from 2009 until early this year, returned to Harvard as president emeritus. He was Treasury secretary under former President Bill Clinton and chief economist of the World Bank.
From sddt.com (SDCo. homes that have no mortgage = 20%):
Nearly one in three mortgage holders in San Diego owe more than the value of their home, according to a CoreLogic report.
Of residential properties with a mortgage in San Diego County, 29.2 percent, or 173,139, were in negative equity at the end of the fourth quarter of 2010, the report said.
Negative equity in the county fell from 29.5 percent at the end of the third quarter. An additional 5 percent, or 29,450 homes, were in near-negative equity, defined as 5 percent equity or less.
Together, mortgages with 5 percent equity or less accounted for 34.5 percent of all homes with a mortgage in the county.
While the percent of San Diego mortgages in negative equity declined on a quarter-to-quarter basis, the percent of homes in near-negative equity increased from 4.8 percent to 5 percent during the same period.
This suggests that the decrease in negative equity came from the foreclosure of underwater mortgages, rather than price increases pushing borrowers above water.
Nationally, negative equity increased in the fourth quarter to 11.1 million, or 23.1 percent of all homes with a mortgage, from 22.5 percent in the third quarter.
Prices declined in the last quarter of the year, leading to lower home values and an increase in the rate of negative equity.
An additional 2.4 million borrowers had less than 5 percent equity nationwide, bringing the total of negative equity and near-negative equity mortgages across the country to 27.9 percent of all residential properties with a mortgage.
“Negative equity holds millions of borrowers captive in their homes, unable to move or sell their properties,” said Mark Fleming, CoreLogic chief economist. “Until the high level of negative equity begins to recede, the housing and mortgage finance markets will remain very sluggish.”
Of those mortgages in near-negative equity or negative equity nationwide, nearly 10 percent had negative equity of 25 percent or more; California had the third largest share of these severe negative-equity mortgages, with nearly 20 percent of all residential properties with a mortgage.
CoreLogic used public record data to calculate its mortgage debt outstanding, which includes first mortgage liens and junior mortgage liens and is adjusted for amortization and home equity utilization.
The Santa Ana-based company estimated the current value of homes using its proprietary automated valuation models.
The Case-Shiller November index showed more negativity overall, to the delight of the mainstream media. Calls for the double dip will escalate, and soon the government will think they need to intervene. Hopefully they’ll keep their hands in their pockets, and not ours.
From the C-S press release:
“With these numbers more analysts will be calling for a double-dip in home prices. Let’s take a moment to define a double-dip as seeing the 10- and 20-City Composites set new post-peak lows. The series are now only 4.8% and 3.3% above their April 2009 lows, suggesting that a double-dip could be confirmed before Spring. Certainly eight cities setting new lows, and with the only positive news concentrated in southern California and Washington DC, the data point to weakness in home prices,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “With an annual growth rate of +3.5% in November, Washington DC was the strongest market, but still well below the +7.7% annual rate of growth seen in May 2010. The only city with a gain in November was San Diego, up a scant 0.1%. While San Diego, Los Angeles and San Francisco are still ahead from November 2009, their annual rates are shrinking in recent months.
Here is the San Diego Case-Shiller Index history:
The idea of lower pricing will cause more people to consider looking to buy a home, but what will they think when they see over-priced turkeys (OPTs) everywhere they go? What will home-lookers do when they realize the disconnect between media reports, and the reality on the street? Commit to spending inordinate amounts of time and energy searching for the needle in the haystack, or give up?
When they can buying anything else they need within minutes, it’s hard to imagine them devoting the time to dig for the deals. But will they just pay the price?
Cramer got fired up about the national spike in December sales, but locally the sales were slightly cooler last month than in 2009. Let’s note than in 2009 there was a tax credit in play, but for the higher-end communities I don’t think it had much impact.
Most of Carlsbad, Encinitas, Rancho Bernardo, RP, Carmel Valley, and Scripps Ranch’s numbers look fairly steady, and Rancho Santa Fe was the most interesting. Check the 3-year December trend for your area below:
“There has been an effective moratorium on foreclosure,” said Roubini.
Around here it looks like the servicers got back on their horse pretty quick:
“The shadow inventory of not-yet-foreclosed homes—due to the moratorium—will surge in the next year,” Roubini says.
Don’t they say that every year? I think the servicers will keep dripping them out little by little. There is no pressure on them to hurry up, and nobody thinks that adding more supply would help the situation. Well, almost nobody.
The detached sales in North San Diego County Coastal have been holding up pretty well in 4Q10.
The 4Q09 sales were somewhat enhanced by the tax credit, yet the last two months aren’t too far behind. This quarter should only end up about 10% lower than the 4Q09 total of 642 sales.
In the peak 2005-2007 era, the pricing for most months was range-bound between $450 to $500/sf, so we’re about 20-25% lower now. It looks pretty steady too – we would need a surge of well-priced inventory to create frenzy, and push pricing higher:
I tacked on 10% to December, 2010’s total to adjust for tomorrow’s closings, and late-reporters. Currently there are 1,261 active listings whose list prices are averaging $619/sf, and have been on the market for an average of 131 days.
The local Case-Shiller index for October dropped again, for the third month in a row. The SD index, which was 165.02 in July, is now down to 159.99 (a plunge of 3%), though year-over-year it’s still up 3%.
We saw the Pacifica REO on the previous post, and here are three four other REOs around the same price point (half-million) in Encinitas. Once they are closed, they should make for excellent double-dip banter if they end up selling for well under list price.
But take a good look – would you be surprised if you hear that they end up selling for less?
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