Rumors are circulating that San Diego County has 20,000, 40,000 or 60,000 bank-owned properties coming to market (I’ve heard all three numbers).
How many can we handle? All of them of course, because there’s nothing price won’t fix. But how many could come to market in the next six months, and sell without much disruption?
LET’S TRY TO PREDICT: HOW MANY MORE REOs COULD THE MARKET DIGEST?
Here’s the chart of San Diego MLS detached and attached monthly sales (in red) and the monthly NOD and Trustee Deed counts taken from Ward’s site:
The NOD counts are suspect because there are so many people defaulting to increase their chances of getting a loan modification. Plenty of them will be foreclosed in the future, with or without a loan mod, but it helps explain why there is such a gap now between NODs and Trustee Deeds.
Here are the overall totals for each year:
MLS Sales: 29,728
MLS Sales: 19,824
The MLS sales are up nicely this year, and are about 30% ahead of 2008 for the first seven months.
Last year there were the 19,575 trustee deeds that either went back to the beneficiary or were bought by a third party. By now the vast majority have been digested, and yet the demand remains high. It appears that the San Diego market can handle at least 20,000 REO sales per year.
In Oceanside today there are 10 buyers for every decent house that comes on the market, and prices are rising on those under $300,000. Throughout the coastal region there are multiple offers on every sharply-priced house.
For there to be an overwhelming surge in REO listings, the servicers would have to get busy foreclosing. There aren’t 20,000 bank-owned properties currently, let alone 40,000 or 60,000.
ForeclosureRadar shows 4,093 bank-owneds today, and the MLS has 2,317 active or pending REO listings, leaving only 1,776 not on the market.
I don’t think the ForeclosureRadar’s counts go back that far, but the servicers have had time to catch up. There might be another 1,000 or 2,000 bank-owneds lingering, but not 20,000.
There are also 8,429 properties that have received their notice of trustee-sale date. If the servicers get busy and foreclose on the bulk of those this year, let’s say 7,000, and add that to the 1,776 and 2,000, we’d have roughly 10,776 more bank-owned properties (or third-party flippers) to look forward to this year.
There were 17,262 MLS sales in the second half of 2008, so if there were another 10,000 REOs listed over the rest of 2009, I think market would gobble them up.
Next year will be very interesting though!