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At the Super Bowl party yesterday a stranger asked how the market was, and I said “Great,….”.

But before I could get in another word, he fired the obligatory blast, “You realtors always say that”.  He then went on to tell me his prognostications, the main one being that he thought the higher-end was going to tumble further.

When conversations go that way, I usually shut up, and just nod my head quietly.  People have strong opinions about real estate, and realtors, and I’m not going to change them in one chat.

But if I would have said something, it would have been: “The banks would have to start putting more foreclosure pressure on the high-enders to trend downward in price.”

Foreclosureradar provides some nifty graphs to follow these thoughts. For those who might be thinking the same thing, here are the San Diego County foreclosure stats for December:

The high-enders are going to be more adept at finding ways to keep their house for as long as possible. To compare, in December 2010 there were 65 notices of trustee sale issued on loan balances over $1,000,000, and only 29 have been foreclosed.

Even though this RealtyTrac report mentioned how foreclosures had dropped significantly in 2011, the latimes.com couldn’t resist starting off their coverage with these two scary paragraphs:

California and other states are likely to see an enormous wave of long-delayed foreclosure action in the coming year as banks deal more aggressively with 3.5 million seriously delinquent mortgages.

And experts said that dealing with the foreclosure process, from issuing notices of default to selling repossessed homes, is likely to push housing prices lower this year before the real estate market has a chance to recover.

There was no mention of pushing “housing prices lower” in the RealtyTrac report, so I wish they would cite their sources. The banks sure seem happy with the current pace of foreclosures in San Diego County – here are the last three years of activity:

Anyone, including reporters, can get a preview of 2012 foreclosure activity by looking at the trend of default notices – and it doesn’t look like ‘enormous wave’ conditions just yet:

I guess we can expect the mainstream media to assist with market overshoot when they insist on puffing their reports with the same tired old stuff.

Here’s a new chart – the price/value results of trustee sales. Even though bidders are running up the purchase prices to 18.5% above the opening bids, on average, this report shows that they are still selling for 18.6% below market value. The dumps must be going out at bargain-basement prices, because the quality properties seem to get bid up to within 10% of market.

There were 127 SFRs on the A-list in North SD County Coastal last week; here are the results:

Scheduled NSDCC SFR Trustee sales, Nov 28th – Dec 2nd:

Only 28% of the properties on the auction list were trying to sell – the rest are either bucking for a loan mod, or going down with the ship – which category they’re in probably doesn’t matter much, because most will shake out over the next few years.

With only 6% actually losing their house (8 of 127), this will drag on a while. There are 355 SFRs on the auction list; the rolling gob of free-rent goo that, for the homeowners, feels like purgatory. Hopefully the servicers can speed it up for everyone’s sake!

Hat tip to SM for sending this along from the nytimes.com: - this is the beginning of article:

A new analysis suggests that the tide of home foreclosures isn’t going to recede soon.

The report from the Center for Responsible Lending, “Lost Ground, 2011,” finds that at least 2.7 million mortgages loaned from 2004 through 2008, or about 6 percent, have ended in foreclosure and that nearly 4 million more home loans (roughly 8 percent) from the same period remain at serious risk.

Put another way, “The nation is not even halfway through the foreclosure crisis,” says the report, which analyzed 27 million mortgages made over the five years.

Read the rest here:

http://bucks.blogs.nytimes.com/2011/11/30/foreclosure-crisis-isnt-even-halfway-over-analysis-finds/?ref=business

It goes into how low-income and minorities have been harder hit.

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Looking at the recent history of SFR foreclosures in North San Diego’s Coastal region, you’d think that there would need to be a major increase of foreclosures to change the market.

From foreclosureradar.com, here are the SFRs foreclosed in NSDCC between Jan 1 and Nov 10:

2007:  132

2008:  251

2009:  293

2010:  336

2011:  294

The MLS shows 2,243 closed sales this year, so even if the foreclosure activity doubled (or short sales ramped up), we should be able to endure it.  But if there was additional turbulence, it would be more likely that the banks/servicers/fedgov would just drag it out longer, rather than flood the market. 

We thought the August blip of increased NOD filings might be a one-time event, but it looks like the servicers are keeping up the pace.  Hopefully it’ll translate into more trustee sales:

Unfortunately, we know that a surge of NODs and about $4 will get you a cup of coffee, but at least the cancellations are moderating – though they are the dominant number:

Someone asked, “JtR, why do you keep posting stories about the can-kicking programs being employed by the government?”

The answer is because the media and government keep insisting that we can’t handle a flood of foreclosures, and that together, they’ll do whatever is necessary to protect from what they think is certain peril. The media is complicit in this charade, because they won’t search out the truth – that the majority of people in this country pay their bills, and are tired of the coddling. 

It is important information for those potential sellers and buyers who are waiting for “the mess to be over” before proceeding.  If the government/media/banks are going to do whatever is necessary to drag this “mess” out for years, participants should devise their strategies accordingly.

Another reminder, from HW:

The housing market faces several more years with 800,000 to 1 million new foreclosed properties per year, according to Rick Sharga, an executive vice president with Carrington Mortgage Services.

Sharga recently left RealtyTrac, where he helped build a network that tracked foreclosure filings across the country. Recently, analysts at Bank of America Merill Lynch estimated REO sales would peak until 2013 when nearly 1.5 million properties would be sold.

According to RealtyTrac, there have been 8.9 million homes lost to foreclosure since 2007, the height of the credit crisis.

Sharga said based on lender behavior, he doesn’t see a spike happening, rather a slow, steady burn in order to spare home prices from further reductions. Today, roughly 4 million homes sell per year. If 1.5 million REO sold, that would be almost 40% of the market, which would be double the current market share of these properties.

“I think it’s less likely that we’re going to see a ‘peak’ year in REO sales that looks dramatically different than what we’ve been seeing over the past few years. This is partly due to relatively weak demand, partly due to what I’d call ‘inventory control’ being executed by the lenders and servicers, and partly due to the fact that foreclosure processing, evictions and redemption periods have all become extended, and often appear to be in a state of flux,” Sharga said.

The largest delay came when servicers were found to be improperly foreclosing on homeowners last year. RealtyTrac said the delays, investigations and ongoing attorneys general settlement talks pushed more than 1 million foreclosures that were supposed to occur in 2011 to 2012.

According to Lender Processing Services, mortgages facing foreclosure are delinquent an average of 611 days. Once a foreclosure is initiated, Sharga said it can take as long as 400 days to complete. So, he said, a loan entering foreclosure in December 2011 won’t hit the market as an REO until January or February 2013.

“Sales volume will be high in 2012, 2013 and probably 2014 as well,” Sharga said. “But it still seems more probable that we’ll see consistently high – yet closely managed – numbers of these sales over several years than it is that we’ll see a huge spike followed by a precipitous drop.”

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So I guess we can expect 1,000,000 or so foreclosures per year across the country until done, with no flood of trustee sales on the horizon. Combine those with the baby-boomer liquidation, which is already underway, and we can expect a steady stream of “under-improved” properties coming to market – which will keep a throttle on prices.

In October, there were 771 properties foreclosed in San Diego County, which was very similar to September’s 755.  In NSDCC there were 28 SFRs foreclosed, continuing the usual average of one a day – it’s a little too uniform, isn’t it? 

For those hoping for more well-priced new listings, it is a frustrating wait.  Here are three of the best foreclosed in October:

In August we saw a spike in NODs, mostly due to Bank of America’s increased output.

It was mentioned here that last month’s NODs appeared to be slowing.  But I just figured out that the NOD reporting by foreclosureradar.com runs about 10 days behind – even though they report the results of trustee sales the same day.  Here are the September NODs - and it appears that we’re back to “normal”, after the August bump that was driven mostly by Bank of America. (revised from earlier today)

Of course it doesn’t mean much unless they are going to actually foreclose on defaulters, which lags behind by at least four months.  Lately, the completed trustee sales aren’t on the rise:

Hopefully we’ll be in for a big spring kick, led by BofA!

Yesterday’s graphs from foreclosureradar weren’t the most recent; but these are the latest available.  I think we’ll see an increase in NODs for the 3Q11 – those totals should be out soon:

The banks are giving plenty of latitude these days:

The cancellations look like they are getting back to “normal” on the quarterly chart:

But over the last few weeks, it looks like cancellations, and 3rd-party buys, have been bouncing around lately:

Hat tip to those who sent in this article from YahooFinance, but scroll down to see local impact:

As the foreclosure backlog continues to build up, delinquent borrowers are spending even more time in their homes without making mortgage payments.

Once borrowers start missing payments, they spend an average of a year and nine months, or 611 days, in foreclosure before banks repossess their homes, according to LPS Mortgage Monitor. That’s more than twice as long as three years ago, when the average was 251 days. Earlier his year, the average was 523 days.

“The number of defaults in the pipeline has been huge and we had more problem loans than ever before,” said Herb Belcher, who supervises analytics for Lender Processing Services (LPS), which provides mortgage industry information and analytics to big banks.

With so many bad loans, servicers have had to prioritize which ones they can deal with and which ones to push aside.  “It’s like your boat has all these holes in it and is taking in water. You have to plug up the worst holes first,” said Belcher.

The bottlenecks are particularly severe in judicial states where the foreclosures are processed through the courts, he said. In non-judicial states, where trustees handle the cases, the average foreclosure is six months shorter.

Fannie Mae and Freddie Mac, which account for the majority of all mortgage lending these days, have been actively lobbying their industry partners — the servicers and attorneys who handle the foreclosure process — to either quickly get paperwork filed and push defaults through the system or put borrowers into a foreclosure prevention program, said Belcher.

The industry has gotten better at dealing with the deluge; it has hired staff and refined procedures to improve efficiency. But a return to more normal processing times will take time given the enormous backlog.

There were more than 4 million homes either in foreclosure or 90 days or more late with payments in August. Many of the new delinquencies are actually repeats: About 75% of the borrowers who fell a month behind in payments in August had missed payments before and then caught up — only to fall behind again.

On the plus side, the percentage of new seriously delinquent loans (90 days or more behind on payments) whose borrowers were up-to-date on payments just six months earlier has dropped to 1.4% from a peak of 2.9% in early 2009.

Many of those borrowers suffered through severe financial reversals, such as a job loss. Foreclosure and unemployment rates generally move in lockstep with each other.

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On August 3, 2010, we ran this post which counted the bank-owned properties in SD County.

Here are the counts of SFRs and condos in SD County, owned by Fannie and Freddie:

It looks pretty orderly to me, for a county with over 3 million people. 

The media insists on including the most dramatic quotes they can find, scaring people into making crazy decisions – like renting REOs, instead of selling them.

The banks, servicers, NAR, etc. keep standing by hoping somebody else comes up with a solution, other than doing what it right – which is to ramp up the foreclosures, and resolve this mess!

Here is the same chart with percentage change over the last year:

With the MSM still peppering us about the size of the shadow inventory, Ed asked today for a summary of the local SFR backlog of defaulters.

Included on the right side is the total number of detached MLS sales over the last 12 months so you can gauge how many years it might take to clear out the shadow:

We’ll expect that a couple of these folks will get their loan mod, a few others will get their yearly bonus, gift or inheritance to get current, and some will get gifts from the FedGov – see below.

P.S. For comparison, during the previous 12 months, there were 2,541 SFR sales on the MLS, while the tax credit was in full swing.

From HW:

The Federal Reserve’s policy of keeping interest rates low to spur lending hit a barrier in the recovery with home prices falling and underwriting guidelines keeping borrowers from refinancing, said Eric Rosengren, president of the Federal Reserve Bank of Boston.

With that in mind, the Fed Bank CEO said he supports policies that would allow homeowners who are underwater on their mortgages to refinance their loans. “Clearly getting more money into the hands of homeowners who spend it could help to fuel GDP growth,” he said. “This would reduce one of the impediments to a more significant effect from the monetary policy actions taken to date.”