“feeding frenzy”

From the Wall Street Journal:

http://online.wsj.com/article/SB125081143925447971.html

The housing market has come out of its tailspin, lifted by falling home prices, low mortgage rates and an $8,000 federal tax credit offered to some first-time home buyers. But stability, to say nothing of strength, still looks a long way off.

The National Association of Realtors is expected to report Friday that sales of existing homes rose for the fourth consecutive month in July, up 2.2% from June, on a seasonally adjusted basis. Problem is, a lot of the action is in distressed properties.

A survey conducted in June of 1,500 real-estate agents sponsored by the trade publication Inside Mortgage Finance found that 36% of all sales involve “nondistressed” properties.

Of the nondistressed sales, only 31% were what the survey described as “unforced or optional.” The rest were sales by homeowners in some kind of financial or personal crisis.

“Think about that for a minute,” John Mauldin of Millennium Wave Advisors wrote this week. “Two-thirds of home sales are either foreclosures or banks taking a loss on the mortgage.” And only a third of the remaining one-third — roughly 10% of overall sales — comes from “something we could call a normal selling process.”

That first-timer credit has sparked sales, and the NAR expects a flurry of sales in the next few months, as the credit expires Nov. 30. At the low end, it is a “feeding frenzy,” says Jim Klinge of Klinge Realty in San Diego.

Meanwhile, the Mortgage Bankers Association said Thursday that the number of homeowners behind on their mortgage payments hit a new high during the second quarter, with more than one in eight homeowners delinquent or in the foreclosure process.

So it is likely that sales will stay mired on the low end of the housing barbell.

Last July, sales of existing homes hit a five-month high, leading the NAR to openly hope a sustained upturn was coming.

It wasn’t.

Today, home sales are roughly where they were last year. Given the state of the consumer and the rise in foreclosures, they may be at this point again next year.

Tsunami Report

Thanks to SJ for sending this along, authored by Sean at foreclosureradar:

http://www.foreclosuretruth.com/blog/sean/waiting-catch-wave-surge-reo-listings-unlikely

Sean: For a number months now I’ve been telling reporters and others that I didn’t think we would see the big wave of foreclosure sales, and subsequent REO listing that some have been predicting. Until recently that was mostly based on a gut level feeling that banks (servicers) simply didn’t have the will to complete more foreclosures given the anti-foreclosure backlash. With a little hindsight, things have become clearer.

First, to be fair to those who have been predicting the wave, the numbers would suggest that California foreclosure sales should be surging right now. After a brief respite due to CA Senate Bill 1137, Notice of Default filings surged last December, and have remained at near records levels since, and even hit a significant new record in March at 52,163 filings. Similiarly, Notices of Trustee Sale have also surged, setting a new record as recently as May. Thus, it would be logical in normal times to conclude that foreclosure sales, and subsequently REO listings, should now be surging too.

But these aren’t normal times. While foreclosure sales have increased since the moratoriums began to lift, they remain well below the peak levels reached July 2008, and as you’ll see in our next CA Foreclosure Report, will actually fall from June to July this year.

So what happened? In my opinion the answer is found in the troubled asset relief announcment made on September 19th by U.S. Treasury Secretary Henry Paulson. Clearly Paulson believed at that time that banks (servicers) would fail unless they were releived of the mounting losses on mortgage backed securities and other troubled assets.

In fact the Fed began purchasing direct obligations of Fannie, Freddie and the Federal Home Loan Banks on September 24, and later began purchasing mortgage backed securities. Click here for details on purchases to date from the Federal Reserve Bank. The total has reached nearly $650 Billion. Keep in mind that the total loan value on ALL foreclosed loans in California since this crisis began is under $200 Billion.

While many will point out this was necessary to keep home loans available and interest rates low, I think it also clearly sent banks a message… you will get more for these assets from the taxpayer than you will through foreclosure. Add to that the mark-to-model rule changes from the Federal Accounting Standards Board, and a ton of politicial pressure and it should be no surprise to anyone that foreclosures have slowed.

The drop in foreclosure sales defies logic given the continued increase in properties scheduled to be foreclosed on. But defying logic to do what is politically expedient while simultaneously inflating bank earnings and bonuses and without regard to future consequences IS the new normal. We are yet again trading tomorrow for today.

For those of you still waiting for a surge of foreclosures, the truth is you’ll likely be waiting a long time.

Sean has a graph here comparing the before and after Paulson announced TARP:

http://www.foreclosuretruth.com/blog/sean/waiting-catch-wave-surge-reo-listings-unlikely

Stay Within Budget

Hat Tip to T!

http://money.cnn.com/galleries/2009/real_estate/0908/gallery.Life_after_foreclosure/3.html

City: Carlsbad, Calif.

Price paid: $840,000

Current value: $600,000

This California resident bought his house nine years ago in a gated community within the posh, seaside city of Carlsbad. He took out an adjustable rate mortgage to keep the initial monthly payments affordable, but by this spring his monthly mortgage bill was $5,600.

At the same time, he found himself severely underwater thanks to falling home prices and several cash-out refinances.

The headhunter and motivational speaker couldn’t afford that big a payment and realized he wasn’t likely to make back nearly a quarter-million dollars in value. He tried for months to work something out with his lender, but he says, “They made me an offer that was unacceptable.”

Instead, Nash, who is married with two kids, decided to go through the foreclosure process. He didn’t pay the mortgage for 18 months and finally vacated in June. Not having a housing payment during that time kept him from financial ruin since his headhunting business was in a tailspin.

Nash and his family are now living in a $1,900-a-month rented townhouse in the same great neighborhood just a half mile away from their former home. “I downsized about 1,000 square feet to a 1,500-square-foot home,” he says. “Hey! It’s a lot easier to clean.”

He feels like he landed on his feet in just about every way: His kids were able to stay in the same school; he stayed in the same location, which is like living in a beach resort; and he’s spending a lot less on housing. “Nothing was lost but a big, freaking headache,” he says.

http://money.cnn.com/galleries/2009/real_estate/0908/gallery.Life_after_foreclosure/3.html

Static

Now that the MLS has a special box for marking bank-owned listings, let’s track their progress lately – are more foreclosed properties coming on the market yet?

San Diego County, Attached and Detached:

Week Of # New Listings Marked PEND Closed
7/5-11
229
236
229
7/12-18
243
227
212
7/19-25
229
252
240
7/26-8/1
211
233
311
8/2-8
211
232
171
8/9-15
198
256
172

New listings are in decline, new pendings are hot and getting hotter, yet getting them closed looks to be tougher now.  Loan servicers have to be in overwhelm mode, or just laughing at us.

Lunch with LY

The first segment of Tuesday’s speech in Mission Valley, with 700+ realtors filling up this ballroom (and two other auxiliary rooms), at $25 per person, lunch included. This youtube clip was taken with a hand-held camera while standing in back – it’s shaky so you may want to listen to audio only:

Old Drinking Buddies

from sddt.com:

The worst may be over for the San Diego housing market, but local and national Realtor associations are trying to rally their members to contribute to their “political survival.”

The San Diego Association of Realtors hosted its Regional Real Estate Summit Tuesday and featured guests like National Association of Realtors Chief Economist Lawrence Yun, California Association of Realtors President James Liptak and N.A.R. immediate past President Dick Gaylord.

The Realtors spoke to a crowd of 700 that included real estate professionals, representatives from the offices of local congressmen and San Diego Mayor Jerry Sanders.

Liptak said the key to achieving Realtor goals was for organizations like N.A.R. and C.A.R. to interact with government officials.

He said it is an “amazing” time to be in the residential real estate business since Realtors have a chance to make a change for the better.

“I honestly feel like I won the lottery,” he said about being the president of C.A.R. during what most real estate professionals have said is one of the strangest markets they’ve encountered.

One of the major points of contention between local real estate professionals and the federal government is the Home Valuation Code of Conduct (HVCC), which has led to out-of-town appraisers being required to do appraisals.

Both the Realtors organizations and the California Association of Mortgage Brokers have urged state and federal governments to put an 18-month moratorium on the HVCC.

Additionally, Realtors and other residential real estate-related industry associations have been pushing to extend and expand the $8,000 first-time homebuyer tax credit.

With the credit expiring on Nov. 30, real estate agents have about a month to make sales that will close in time to qualify for the credit.

Realtors hope to extend the duration of the qualifying period to sometime in the middle of 2010 in order to encourage home sales. Additionally, they want it to be available to all home purchasers, not just first-time buyers.

The Realtors said the tax credit is responsible for the number of home sales tripling in some parts of San Diego County this year.

With inventory levels in the area at a two- to three-month supply and median prices stabilizing, Yun said the housing market is improving while the rest of the country lags.

“In my view, the downturn is over” in San Diego, he said.

Even with a slew of foreclosures expected to increase inventory across the country, Yun said in San Diego, there is enough demand to absorb it.

Local real estate agents have said they have received dozens of offers on underpriced foreclosures.

S.D.A.R. President Erik Weichelt said he received 103 offers on a house he listed recently, with the final sale totaling more than $150,000 over the asking price.

With all the competition in the market for mid- and low-priced homes, Yun said there are reasons for potential homebuyers to be optimistic about the current market.

“People who are buying today might see a home equity gain a year from now,” he said. “Further decline in prices could be minimal — if there are price declines at all.”

However, he said sales for higher-priced homes are still sluggish and will likely not improve until financing for jumbo loans is easier to come by.

On the Golf Course

Two of the former models in Encinitas Ranch were inputted onto the MLS on the same day last week, both above $1.2 million. They are two doors down from each other, and are in the stretch of fairway where you are most susceptible to being hit by errant golf balls. This youtube video catches a glimpse of neighboring houses that aren’t selling, nor in foreclosure – sorry:

4S Ranch Dressing

This youtube video tour highlights the north side of 4S Ranch (West RB, 92127) where the density is high, Mello-Ruze higher, and timing bad – this 3,390sf house was sold new in April, 2005 for $847,000.

I checked the sales when I returned, and they are healthy:

Sq. Ft. Sales Price Date
3,169sf $650,000 6/19
3,431sf $658,000 7/27
3,197sf $670,000 7/9
3,675sf $735,000 7/16

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