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Is the new year bringing more REOs to market?

Though everyone wants to “steal one from the bank”, if you’re looking to buy in North SD County Coastal (Carlsbad-to-La Jolla), you’ll find few opportunities to snag an REO sale.

Have there been more REO listings coming on the market in 2010?

No flood yet.  What’s the difference in pricing?

Buyers see the REO listings, and dig the improved pricing – but there aren’t enough to go around.  We don’t necessarily need more REO inventory, just more REO-type pricing on regular listings.

Our old friend in La Costa Oaks keeps evolving.  Out of the 20 homes on the street, four have been foreclosed, and two sold short (one of those is still pending).  But on November 9th there was a sale of a 3,345sf house on the culdesac that was head-scratcher:

from sddt.com:

Notices of default and trustee deeds fell a combined 22 percent in November from October.

Data from the San Diego County Assessor showed trustee deeds — the last step in the foreclosure process — dipped 17 percent from October to 1,128. Year over year, trustee deeds are down 1 percent.

The number of NODs filed was down nearly 25 percent to 2,182 last month.

Despite the month-to-month drop, November nearly doubled the number of NODs filed in the same month last year when there was a foreclosure moratorium in place from mortgage giants Fannie Mae and Freddie Mac.

The month-to-month dips can be attributed to some seasonal declines. On average, over the past five years, foreclosure filings have fallen 10 percent from October to November.

Year to date, there have been 4,189 fewer trustee’s deeds filed this year than 2008.

Read the rest of this entry »

From sddt:  “Even with NOD numbers virtually flat with 2,880 in October and 2,875 in September, 2009 is on pace to break 2008’s record-breaking 34,069 NODs filed in a single year.  With two more months to go, 2009 has racked up 33,904 NODs and has averaged 3,390 per month.”

According to foreclosureradar.com, about 25% of the trustee sales in October were purchased by third parties on the courthouse steps.

There were 877 REO listings inputted onto the MLS last month.

Those on tsunami watch are having trouble staying awake, but after all the dripping it’s no surprise that the weekly totals of new REO listings coming onto the MLS in SD County are only slightly higher:

While NAR has taken a lead role in supporting the tax credit extension, you have to believe the banking lobby is pushing it hard too. Don’t they have to be thinking that the next six months is a prime opportunity to dump a load of REOs?

Hat tip to Tom for sending this along.

Sean at foreclosureradar.com has published his latest report:

https://s3.amazonaws.com/CA_Foreclosure_Report/September+2009+CA+Foreclosure+Report.pdf

Excerpts:

With 90,365 properties in inventory, banks currently carry about 4.77 months of supply, however, it takes the banks on average 7.33 months to dispose of a bank owned home, thus current inventory is less than should be expected from normal operations given current foreclosure volumes. Bottom line – there is no “shadow” inventory of bank owned homes being intentionally withheld from the market.

The number of properties on the brink of foreclosure continues to increase and has more than doubled from a year ago. With a smaller percentage of scheduled foreclosures actually being sold due to postponements at trustee sale, while at the same time seeing strong sales of bank owned (REO) properties, banks have managed to reduce their inventory by 41.8 percent from a year earlier. With the banks reselling an average of 18,943 homes a month in the 3rd quarter, and an average time to resell of 7 months (given the time taken for eviction, repairs and resale), we believe there is essentially NO shadow inventory of bank owned homes at this time. Moving forward there are more loans which are delinquent, in default, and scheduled for trustee sale than ever before, which would typically lead to a significant rise in foreclosure sales. We do not believe this increase is likely in the near future given the continued political pressure on banks not to foreclose.

Foreclosures continue to be sold at trustee sale at considerable discount to both the outstanding loan balance and the current estimated fair market value. As we saw in foreclosure outcomes, the lure of an average 20.5 percent discount to fair market value has dramatically increased the number of properties sold to 3rd party investors. At the same time it is very clear why more properties aren’t purchased at auction – with banks pricing the properties they end up taking back as REO an average 23 percent more than the current market value.

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Here the weekly totals of new SD REO listings coming on the MLS – no real increases:

Of those 1,116 REO listings, 717 have already been marked contingent, pending, or sold (64%). The drip system is working great for the lenders!

In the same time frame there have been 4,753 non-REO listings inputted, and 1,850 of those are contingent, pending, or sold (39%).

REO listings make up 19% of the total new listings, but 28% of the contingents, pendings, and solds.

Here’s one more 16-page report on shadow inventory, with many charts and graphs:

http://matrix.millersamuel.com/wp-content/3q09/Amherst%20Mortgage%20Insight%2009232009.pdf

An excerpt:

The single largest impediment to a recovery in the housing market is the large number of loans that are either in delinquent status or in foreclosure that are destined to liquidate.

This creates a huge shadow inventory.  We estimate this housing overhang at 7 million units, or 135% of a full year of existing home sales.

We look at the impact on a number of local markets, then look to the causes of the overhang:

1. Transition rates are high,

2. Cure rates are low, and

3. Loans (foreclosures) are taking longer to liquidate.

We are concerned that, in light of this housing overhang, the stabilization we have seen in home prices the last few months is temporary.

They’ve identified the big picture, and used Riverside as a test case.  Let’s take our own look at Carmel Valley, 92130, which is a pertinent test for a couple of reasons; 1) it’s housing stock is mostly newer tract houses, and a more-homogenous sample should run truer, and 2) it has been one of the best performers so far.  You can probably guess that your favorite surrounding areas may be faring somewhat worse.

Current MLS detached and attached active listings: 242

ForeclosureRadar.com’s NODs, NOTs, and REOs list: 192

Duplicates: 58

Total Inventory 242 + 192 – 58 = 376

Month’s Worth of Inventory: 376/77 = 4.88 months – if we can assume low or no seasonality into September’s 77 closings.  This report makes a big deal about seasonality, but I think in Carmel Valley there will be less seasonal effect this year due to lower pricing.  Last year in 92130 the number of monthly sales for September through January were 46, 50, 31, 32, 32.

Of the 134 defaulted properties that aren’t on the MLS:

There are 10 bank-owned properties and 55 others on the auction list that aren’t on the MLS.  Let’s assume that ALL 65 of those will make it to market at some point over the next six months. (65)

Many of the unlisted 69 NODs are homeowners who have applied for a loan modification.  How do I know this?  I’ve knocked on their door, and close to 100% of the owners say it.  But let’s assume that half will either get an acceptable loan modification, or go back to their original payments, rather than get foreclosed.  Let’s be conservative and add 40 more of the NODs to the ‘future foreclosure’ roll. (40)

But let’s also include about 30 of the 58 that are trying to sell who will fail, and get foreclosed anyway. (30)

60 + 40 + 30 = 135 more houses and condos are ’shadow inventory’, properties that aren’t on the open market currently, but should be in the next six months.

You can decide for yourself what the impact will be on 92130 with an extra 10-20 homes per month coming on the market.  I think there are enough buyers waiting that they will all sell, it’s just a matter for how much.  There are only 20 of the 198 detached active MLS listings that are under the magical $300/sf number on their list prices – you can bet the REOs will be right around there.

True, those who are delinquent but haven’t received an NOD yet are not in the count, but did they just got a later start than these folks?  Most importantly, are the defaulters growing faster today than earlier in the year?  If so, tack on more pain to your own opinion.

Here is the list – if you see one you’d like to pursue, contact me:

92130-oct-09-alphabetical

From sddt.com

The number of notices of default and trustee deeds filed in San Diego County in September fell for the third consecutive month. 

The county assessor recorded a 4-percent drop in notices of default (NODs) from August.  The 2,795 NODs filed were the fewest in a single month since November 2008. However, the figure is still more than double the total filed in September 2008.

The number of trustee deeds was down more significantly with a 15-percent month-to-month decline. While 1,156 trustee deeds is a high one-month total from a historical standpoint, it is 41 percent lower than the number recorded in September 2008.

(The MLS is showing 2,690 closings at $232/sf last month for all residential properties.  In September, 2008 there were 3,004 closings, at $248/sf.)

The poll results ran about 3 to 1 in favor of trickle, but I think we can agree that a flood is certainly possible.  All it would take is: 

1.  Citizens revolt, resulting in a political uprising that turns off the backstop, or

2.  One of the servicers who also owns a lot of paper breaks rank, and unloads.  They decide that being the first one out wins.  But it would take a real renegade.

Where is Angelo when you need him?

CR is covering the news better than ever, but for those who may have missed this week’s latest reports on the so-called ’shadow inventory’, here are two articles (hat tip to MM for sending both!)

http://online.wsj.com/article/SB125366552480532521.html

http://www.bloomberg.com/apps/news?pid=20601087&sid=aw6_gqc0EKKg

An excerpt from Bloomberg’s:

“The crash in U.S. home prices will probably resume because about 7 million properties that are likely to be seized by lenders have yet to hit the market, Amherst Securities Group LP analysts said.”

Talking about a flood of foreclosures may sell a few newspapers, but will it ever happen?

Here are the number of new REO listings inputted onto the MLS the last seven weeks:

211, 198, 191, 208, 196, 177, 208

We could say they increased 18% in the latest week, but hardly a tsunami.  We’d need to see hundreds more per week to believe the flood is for real.  Until then, the drip method will remain the servicers’ preferred choice of liquidation. 

Who knows if they could flood the market if they wanted to?

I heard a good one yesterday though from an insider - Chase is “sitting on” roughly 450,000 properties, mostly from the WaMu portfolio, which I speculated means they have a lot of defaulters, not REOs.  Unless they are hiring thousands of new staff people to push those through, it’ll take them years to resolve that mess.

Expect the trickle to continue, at least for now.

Let’s take a poll:

Do you think we’ll ever see a flood, or will the-powers-that-be keep trickling us forever?