Institutional investors entered the housing market at a rapid pace this past year, but their level of purchasing activity is relatively small compared to the overall market.
For instance, Blackstone Group is expected to be the largest institutional purchaser in 2013, committing to 15,000 properties.
However, when compared to the 600,000 individual investor purchases in 2012, it’s clear that institutional investors are still the underdogs in the market, according to CoreLogic’s market pulse report.
To come to this conclusion, CoreLogic created a list of 16 markets that include the top five markets for REO declines, the top 10 markets ranked by the total of REOs and the top REO markets identified as attractive by investors.
San Diego had the highest increase in 4Q12 REO prices of the cities that don’t have a rising share of institutional investors. Go Mom and Pop!
Wouldn’t it make sense for banks to be unloading REOs when all we see are bidding wars everywhere?
Initially we thought that the drop-off in foreclosures was because banks were pushing people to short sale instead. With this being the last year of debt-tax exemptions, wouldn’t we be seeing a surge of new short-sale listings?
Nope, instead it appears that they have shut down the foreclosure machine:
San Diego County New Listings between Jan 1 and Feb 28:
Year
SS Listings
REO Listings
2010
3,106
1,427
2011
2,766
1,297
2012
2,402
919
2013
1,187
393
Defaulting homeowners are going to squat as long as possible because they really don’t want to move – besides, rents are high and their credit is shot.
For short sales to occur, banks have to threaten to foreclose in order to keep the pressure on, otherwise defaulters will just keeping living for free.
But both short-sales and REO listings have plummeted.
Pollyanna thinks that people are making their payments again, or that the foreclosure settlement caused enough loan-mods that the problems are solved. No way. Filings are down, and cancellations are up because that has become policy now.
How many short sales and REOs are happening in the elite areas of NSDCC? 12%
Detached Sales between April 1 and July 31 in Del Mar, Solana Beach, RSF, and CV:
Type
# of Sales
Avg $/sf
% of Total
SS & REOs
48
$297/sf
12%
Non-SS&REOs
338
$431/sf
88%
Total
386
$414/sf
100%
Here is the map of where the SS & REOs were located:
There are 135 SFRs on the NOD and NOTS lists, so there will be a few more dripped out, but for the most part we are in a non-distressed market – at least as far as we can tell.
Will banks keep the pressure on those behind in payments?
With the tax exemption of debt-relief expiring at the end of the year, we keep thinking that there will be a surge of short-sale listings coming to market.
Not only is there NOT a surge of short-sale listings, there’s not a surge of ANY listings, relatively.
Here are the total new listings that came on the market in SD County between March 1st – 15th:
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:
Freddie Mac vendors sold fewer REO properties in the third quarter than they did earlier in the year as nonperforming loans continue to climb.
More than 25,300 repossessed homes held by Freddie Mac sold in the third quarter, down 13.5% from the nearly 30,000 in the previous three months. It was also a 17% decline from the record-setting 31,600 sold in the first quarter.
At the same time Freddie unloaded the 25,300 REO, it repossessed another 24,300 homes back into the inventory. At the end of the quarter, Freddie held 60,000 REO on its books, which has been trimmed — as new foreclosures are completed — from 75,000 one year ago.
If the current trend holds, and the GSE reduces a net 1,000 REO from its inventory every quarter, it would take 60 quarters to unload its entire inventory — roughly 15 years.
Meanwhile, nonperforming assets continue to mount. These troubled mortgages totaled $127.9 billion, or 6.6% of its total mortgage portfolio, in the third quarter. That’s up 3.2% from the previous quarter.
To help manage the still mounting problem holding back housing and as an extension the overall economy, the Obama administration and the Federal Housing Finance Agency began asking market participants for ideas on selling these properties in bulk and even possibly renting them.
Before a House subcommittee Thursday, FHFA Acting Director Edward DeMarco reiterated that such a strategy will not be implemented nationwide but on a local level.
“We are not looking to develop a single, national program for REO disposition. We are most interested in proposals tailored to the needs and economic conditions of local communities,” DeMarco said. “We received nearly 4,000 responses to the RFI and are reviewing the submissions.”
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.
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.”
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:
It must be "if/when" prices decline because market forces have changed (e.g. foreclosures now outlawed) and we're i… twitter.com/i/web/status/10978…
I'll keep going. Nobody will dispute that homeownership is a great investment....for those who can afford it. But t… twitter.com/i/web/status/10978…
Reviews on Zillow
4054725
”
Could not be happier with my experience with Jim and his team. He helped me sell a very unique and challenging property. Throughout the entire process he was always available, honest, transparent, trustworthy, and always put my interests as a seller first. A (rare) true professional! During close of escrow Jim went above and beyond to complete the deal. It would not have been possible without his experience, fantastic team, and pure dedication. Highly recommended!
Thanks Jim and Donna Klinge! more “
5.0/5.0
by Shaun
4295507
”
Jim and the team at Klinge Reality are without a doubt the best in the business! Not only was Jim helpful and extremely knowledgeable, he was patient and determined to help me find my first home. Jim and his team have been in the business for many years, and it shows. Jim is a wealth of knowledge and was my biggest proponent despite the temperature of the competitive market. I ended up getting the perfect property in my dream neighborhood all thanks to Jim. From the day my offer was accepted, Donna was a real lifesaver. She was extremely helpful, responsive, and knowledgeable when it came to every minute detail, and held my hand through the process. more “
5.0/5.0
by Rachel
3902922
”
We first encountered Jim back in 2010 when we were looking to move from Pismo Beach, CA to to San Diego area. We had been having a difficult time finding (1) finding a realtor and (2) being able to see a home since we were so far away. Then we found Jim. He made the process really easy – he was able to take incredible video tours of the homes and it was as if we were there touring the homes ourselves. once we found homes we really liked, we took a trip to see it in person. One of the things we really liked about Jim was that he was honest with us about the homes and advised us weather a home was a good buy or not. He was not just out to quickly sell us a house just to make a commission. He really cared about ensuring we found the right one. more “
5.0/5.0
by zuser20170916112822710
3424100
”
I have followed Jim’s BubbleInfo blog from the early days of the bubble when “real estate could only go up in value” and I knew him to be a straight shooter who would not sugar coat properties nor gloss over their faults.
So when we decided to move back to California after 7 years in the more “
5.0/5.0
by zuser20160809095816651
3423410
”
Jim met with us prior to listing – provided guidance on preparation, detailed information and stats regarding local market conditions. He was invaluable for providing contacts for repair and improvements that would provide return on investment. Our combined efforts, strategy and his attentativeness more “
5.0/5.0
by sunfibers
3402583
”
Jim and Donna Klinge are an impressive team. They work extremely well together and back each other up, as well as their clients, along every step of the way. Their expert guidance made a tremendous difference in the experience we had, both buying a new home and selling our previous home of 40 more “
5.0/5.0
by welflybqy
3376698
”
Since Zillow only allows me to write 1 review per real estate transaction, per team of agents we worked with, this is going to be a super long review.Review on Jim Klinge:
Jim Klinge is the quintessential real estate agent, the “broker’s, broker” of real estate agents. My husband and I reached more “
5.0/5.0
by Louie and Tim Cook
2965881
”
Jim and Donna are the BEST of the BEST! Their knowledge, professionalism, work ethic, and devotion to their trade are unrivaled. It was refreshing to have worked with a pair of professionals who truly understand the meaning of customer service, a lost art in our opinion. Despite living over 3,000 miles away on the opposite coast, Jim and Donna were with us every step of more “
5.0/5.0
by jmcgrady888
2793737
”
Jim found me a multi family property that we purchased as an investment (Please see my review of Donna Klinge for details on how it went). But the bottom line is this: I never would have found this property, which cash flows right out of the gate, if it weren’t for Jim pointing me toward that house. It just was not on my radar, even though I consider myself a savvy real estate troll. Jim is giving of his time, and his intelligence. And he is also transparent and truthful. And I think he is funny, which is helpful in stressful situations like RE transactions. Jim and Donna have earned every last penny they made from our deal — and in fact they deserve more. And that is why I will use them for my RE transactions the rest of my life. Thank you, Jim and Donna! more “
5.0/5.0
by bethamunce
2614748
”
I can’t say enough about Jim and Donna. Jim got a great price for us and negotiated well. Donna walked us through escrow, handling vendors, and negotiating everything we asked for in the request for repairs. They are know exactly what they are doing and I’ve already recommended them to two other people. more “
5.0/5.0
by mrjriley721
2616367
”
I followed Jim’s blog for several years and decided to contact him (along with several other realtors) when an out-of-state work relocation required me to sell my home in San Marcos, Ca. At our initially meeting, Jim spent a significant amount of time discussing pricing options, strategy, as well… more “
5.0/5.0
by skerzz
2549952
”
Honesty. Integrity. Professionalism. Dedication. Commitment. Jim and Donna Klinge hold these attributes in abundance. They have acted as both our buyer agent and our seller agent delivering highly relevant insight into local market conditions, spot-on advice to maximize the home’s value, and unparalleled management of the transaction process… more “
5.0/5.0
by Ohana77
2539416
”
I cannot imagine a better experience! Jim was our broker when my husband and I bought our first house. Jim never pressured us or glossed over anything. He was patient, knowledgeable, and helped us buy our dream home. His office was detail-oriented, always responsive and we closed in 30 days! The excellent service didn’t end when we bought our house, either, the Klinges have given us excellent and fast referrals along the way. We feel privileged to have worked with such a consummate professional and appreciate how rare this level of skill is. Jim is simply the best in the field. more “
5.0/5.0
by ashleyannhorton
2361102
”
Jim and his team are top flight. He knows the market better than anyone, and his team ensures the deal goes through without a hitch. There’s always something at the last minute, but you’d never know it with Jim and his crew. I’ve bought and sold houses with Jim as my agent over the years, and I wouldn’t use anyone else. Save yourself the headaches and potential costly mistakes… more “
5.0/5.0
by mdmorel
2359920
”
Buying a house is one of the most emotional,exciting, and sometimes confusing milestones you’ll reach for in your life! Being a buyer in this market can make it even more interesting! My husband and I have been looking to buy for a year, and when the time came we wanted a realtor team that would be on our team! Being that I’m a business woman and was 7 months pregnant, I wanted, NEEDED, communication, dependability, and consistency! The Klinges went so far above and beyond … more “
5.0/5.0
by AmberleePiercy
2279703
”
Jim was recommended to me when I bought my first house here in the US five years ago. He and Donna explained the whole process and it was a great experience to work with them. Not surprisingly, when my company asked me to relocate my first choice was to work with them again… more “
5.0/5.0
by user3276464
2263060
”
I have followed Jim’s real estate blog for years and by the time I got ready to sell my townhouse I felt I knew him both personally and professionally. At our first meeting he was prepared with recent comps and listings for the area… more “
The links below give you alternatives to accessing bubbleinfo.com and other real estate-related content. The bubbleinfo.com facebook page includes all the bubbleinfo posts. On the twitter account, Jim tweets articles of general real estate interest, preceded by his descriptive comment (you don't have to have a twitter account, or "follow" to read it). The tweets are also displayed in the right-hand column above.
If you prefer to access bubbleinfo.com with your mobile device, the bubbleinfo mobile app for iOS and Android is available for free at their app stores.
If you are only concerned about buying and selling in SD North County and how Jim can help you, stay right here at bubbleinfo - in fact, subscribe so the new posts come to you automatically.