I think this shows the ineffectiveness of loan modifications. Since last November the government has enacted the biggest loan-mod program in the history of the world, and yet there were only 51 additional cancellations Y-O-Y?
Foreclosure sales have been canceled at an increasing rate as loan modifications take hold, according to ForeclosureRadar, a Stockton-area data company that monitors California’s distressed housing market.
For San Diego County, the daily cancellation count increased nearly a third, from 34 in October to 45 last month. There were 741 cancellations in October and 824 in November. In November 2008, there were 773 cancellations.
Meanwhile, 1,283 foreclosures became final last month, down from 1,346 in October and up from 1,115 in November last year.
“We’re probably going to see a wave of cancellations rather than a wave of foreclosures as some have been predicting,” said Sean O’Toole, founder and CEO of ForeclosureRadar.
Statewide, the daily cancellation rate rose 40 percent, based on a total of 8,741 in October and 10,469 last month. November 2008’s figure was 8,302. The daily rate is pegged to the varying number of business days in each month.
Peter Dennehy, senior vice president of Sullivan Group Real Estate Advisors in San Diego, said fewer foreclosures would improve the housing market, at least in the short term.
“We’d have a healthier housing market if we had a better economy and better job prospects and if people are actually able to pay their mortgages,” he said. “It’s not one thing or the other.”
While foreclosures typically carry low prices, Dennehy said first-time buyers often cannot compete against investors or get loans for as-is properties that banks will not pay to repair.
“What we really want to see is normal people buying and selling homes at all levels of the market,” he said.
Under pressure from the Obama administration, banks have been delaying or canceling foreclosures while they work with borrowers to modify their loans or arrange for short sales — selling homes for less than the outstanding mortgage balance. The latest effort, called the Home Affordable Modification Program, offers a cash incentive to lenders and borrowers to come to an agreement that results in a lower monthly payment, tied to borrowers’ income, for five years. At the end of the period, the monthly payment rises to amortize the mortgage over the remaining life of the loan.
A foreclosure moratorium imposed by the Legislature last year caused a spike in cancellations, as well, O’Toole said.
O’Toole, who sells foreclosure data to investors, government agencies and lenders, said that in the short term, fewer foreclosures could help stabilize the housing market and prompt nondistressed property owners to sell and buy another home.
“I think that very well is something that we’ll see unfold in the first couple quarters (of 2010),” O’Toole said.
But he believes many owners are holding back because of continued distress by other owners. If too many of those homes are lost to foreclosure, prices overall might tumble and generate less money to nondistressed sellers.
“That’s faulty logic on the move-up-buyer side,” O’Toole said. “For move-up buyers, if that happens, the value of their home falls further, but that doesn’t really matter” because they would presumably make up the loss by getting a lower price on the new home they buy.
In the long term, O’Toole said, delaying foreclosures through loan modification is likely to postpone the day of reckoning for many owners. That’s because their home values may not bounce back sufficiently by the time their modified loans reset. At that point, they will face higher payments on mortgages that still exceed the market value.
“So, actually, I think in many cases, like bankruptcy, it’s not a fun process to go through, but (foreclosure) cleans out the problems and gives people a chance to come back and start over,” he said.
Speaking of San Diego’s prospects, O’Toole said the area may be relatively strong in terms of the economy and stabilizing home values.
According to MDA DataQuick, San Diego County foreclosures by all lenders totaled 11,393 from January through October, down from 15,414 for the same period last year.
So why doesnt everyone quit paying and get a loan mod?So is housing now an asset class where you are guaranteed by the govt to not lose money?
Zill,
You change your name repeatedly, you add a new comment within seconds of a new post, and you don’t have a specific points, just general ramblings.
Are you OK?
Are you a stalker?
Do you have a problem with me changing my name?I was browseing the net this morning over coffee and checked your sie as usual.what is worng with my comment?Are you paranoid or something?
jim it is getting to the point where I think anyone who disagrees with what you post is constantly criticized.I have a problem with housing gamblers being bailed out by taxpayer money.I know you might see it otherwise because your check depends on it.
I guess that answers that.
In the long term, O’Toole said, delaying foreclosures through loan modification is likely to postpone the day of reckoning for many owners. That’s because their home values may not bounce back sufficiently by the time their modified loans reset. At that point, they will face higher payments on mortgages that still exceed the market value.
When you examine the overall economic conditions, depending on the location, I believe it’s insane to buy a house right now. Prices are still too high in certain areas, but that day of reckoning still awaits.
So is housing now an asset class where you are guaranteed by the govt to not lose money?
That’s what it seems like. Dr. HB posts some great data on the housing market maker, and it appears to be Uncle Sam.
I don’t know, I think I disagree with JTR frequently enough. He hasn’t banned or threatened me yet. Disagreeing is one thing, trolling is another.
Just sayin.
—-
Here’s the problem with the whole “foreclosure is the answer because it cleans out the market”. It doesn’t. Or hasn’t it. The author is right to think it could do that but that’s not what’s going on now. The banksters are sitting on inventory because they know uncle sam will prop them up and they’re speculating home values will only go up.
If foreclosed homes were going on the market and not hiding, yes, the falling values those additional homes would create would change things.
And then, of course, there’s employment. While there is no shortage of real estate investors waiting on the sidelines they don’t really help as much as a lot of people buying homes (they can afford).
This economic issue isn’t simple or easy but we’ve bought and now we’re living with it. Anything the government does is going to be half-ass, misguided and probably not enough but with that said, the private market didn’t the country any favors either, did they? They’re private banksters and realtors helped create this situation so it’s obviously not a good solution to expect things to resolve themselves.
In 10 years when the next housing boom comes again, what will people think about housing ?
That’s right, it is a game that you can not lost. This whole bail out, loan mod and delay will create that next boom that even fed can not stop. The fed will try and print 10x more money than this time and then eventually fail. Here we come the hyper-inflation.
I remember hearing from many commentators in the 2005-07 timeframe that one of the fundamental bubble problems had to do with specuvestors treating housing as no longer something you acquired to live in, but housing was looked at only as an investment/atm, that housing was no longer something looked at from the perspective of utility. Decisions based on monetary return trumped the notion that housing was something you bought to live in. This thinking was part and parcel of the bubble.
Now I wonder if we have come full circle. That there is a significant segment out there who focus only on the possibility/probability that housing will continue to fall, and that government will continue to screw the average joe. Don’t buy a house now because of utility or an improved life style because of the fear that the investment will prove to be a loss or that the bottom is in the future, coming interest rate increases will knock the wind out of housing, the liquidity trap will lead to lower prices, etc.
And this thinking by an apparently large segment is occurring at a time when “affordability” in California is at an all time high. I admit that I am myself subject to this thinking sometimes, but I am beginning to wonder whether the phrase “don’t fight the fed” has a new meaning. One of those meanings to me is to move beyond the popular, never ending blame game of everyone who has caused the economic situation we are in, and instead try to navigate through it as best as possible without being influenced by considerations of who is morally right or wrong, or who is screwing or getting screwed.
One of my new years resolutions will be to not let the headlines, be it mainstream press or sophisticated macro-economic/socioeconomic blogs, trump what I see as local facts on the ground. And for that, I thank you JTR for all you have done this year. You are a fantastic resource for anyone interested in North County San Diego real estate.
This economic issue isn’t simple or easy
It is easy and it is simple. What it isn’t is painless. What we are deciding is how much pain we want to endure for how long. The shorter it is the greater the maximum pain at any given time but the less cumulative pain we suffer. The longer it is the lower the maximum pain at the worst time but the greater the cumulative pain endured. To the extent creditors suffer more pain than debtors, people will learn to borrow rather than save.
I have noticed a phenomenon when foreclosed homes go on the market in my area. Maybe one of you commenters or Jim can explain it. While most for sale signs are at eye level and of a size that can be read while driving past and hanging from a sizable wooden post, many foreclosed signs are below eye level, barely visible behind bushes, small in size and not suspended from a post but tapped into the ground. My suspicions are raised but I can’t quite grasp the reasons for this. I can only conclude that the banks don’t really want to sell them (surely they can afford proper signage)and are grudgingly doing the minimum to make it look as if they are. Any thoughts??
Yesterday, we have 2 more months of unemployment benefit extension from Fed.
So, does anyone know how many weeks (or years) can one get unemployment benefit ?
I goolged it, and some said it is 1 and half years.
i wonder why I am still having a job ?!
See, pepsi’s learning the lesson already. It doesn’t pay to be a hard working saver.
“It doesn’t pay to be a hard working saver.”
Of all of the comments on this blog, that’s the type of comment that bothers me the most. It’s not overtly negative, like a troll. It’s the insidiously negative, “woe are those of us who the ‘right thing'” mentality that just drives me up the wall.
I have multiple friends who bought million-dollar houses at the peak. Do you think they are laughing all the way to the bank, “ha ha look at me?” No, they are sweating it out, having sleepless nights, trying to figure out whether they should screw their credit and dump the house or screw themselves by paying hundreds of thousands of extra dollars that the house may never regain in value.
For those who choose a loan mod, it isn’t easy. It’s a never-ending stream of paperwork, phone calls, one person telling you one thing and another telling you another. Even with the “free rent program”, you never know when you’re going to get booted from your house. It’s not a pleasant existence.
I am happy that I rent. One day, I will buy a house and be happy about that. In the meantime, I work hard (and smart), I save, and I count my blessings. There are billions of people out there with no access to clean water, let alone enough technology in their homes to post some whiny BS comment on a housing bubble blog.
Get over yourself.
-Erica
Kingside post 9 has my vote for most eloquent post of the year. THose folk focusing on the wrong things will be the ones who move waay inland(not that there is anything wrong with that) or pay at the peak of the next cycle or just sit in fear while precious years pass them by.
Another thing Kingside – it is my most humble opinion that the national housing bust is pretty much over- it’s all local now and no we are not Detroit as those who push the continued declines like to point out.
Yeah, Kingside is right. Once you understand and accept the rules, you’ll be better at playing the game.
Example: theoretically, FHA sickens me. NO WAY people should be buying homes with 3.5% down and a taxpayer backstop, but that’s exactly how I’d like to borrow. I’m not going to let my ideals get in the way of a smart business decision.
I’ve also accepted the fact that government will do anything to prop up housing. I still think there’s a way to go down in some areas (Carlsbad appears to be in a freefall and CV’s day will come,) but not as much as I’d like or as much as I think it should. If I’m not careful, the great opportunity I’ve been waiting for will pass me by, just as John says.
Jim–The Blur mentioned that Carlsbad was in a Freefall–The last I checked prices were a bit off, but inventories were low, market time was low and things were selling–can you post some stats. Wish I could have made it to Pizza Port–looked like a good time! Happy Holidays!
great post Kingside. and Blur, I totally agree. I don’t necessarily agree with FHA, but I was happy to take advantage of it, even though I could have made a large down payment.
Kingside said it better than I could: “move beyond the popular, never ending blame game…instead try to navigate through it as best as possible”
oops, Anonymous post #19 was me
I’ve been preaching what Kingside wrote this entire time, but keeping that mindset is easier said than done – though I try.
The cancellations are not mostly modifications in action but one of 2 things:
1 Short sale waiting for approval or in escrow.
2 Bank just doesn’t want the property back as then they have to account for it in their default numbers thus reducing “profitablity”. (Have witnessd more then a few that were postponed yet were vacant. How do you explain that?)
The only thing any of us can do is look at our individual circumstances and outlook and make the decision that is best for ourselves and no one else. For some, the time to buy is now. For others (like myself), it’s still a ways off.
Meanwhile, Jim provides an invaluable an ongoing education for when that time comes!
Great comments!!
Thanks tj, and agreed – let’s examine the evidence regularly and see when it’s right for each individual!
“In a nation ruled by swine, all pigs are upward mobile…”
Erica,
Most people do count their blessings. You say there are people who bought million-dollar+ homes and are now having a difficult time because they don’t know if they should fulfill their obligations that they **voluntarily** agreed to, or if they should screw their lenders. Then, there are the other “victims” who are having difficulties with loan mods — again, trying to force other people to take the losses that the borrowers should take.
There is a HUGE difference between the people who might suffer the consequences of **their own** actions (willingly overpaying whether for their own families or for speculative purposes), and those of us who don’t want to suffer any longer because of the greed and foolishness of others. You weren’t around when those of us who were trying to warn about the bubble many years ago were being chastized for our “doom and gloom” pronouncements and you weren’t there while we were being called “bitter, jealous renters” by those who now want us to pay for their mistakes.
Many people have put off major life events like marriage and children while waiting for the bubble to burst. Some people are facing the very real possibility that they will never own a home in which they can raise their family because their kids have grown so much during this bubble, and will be too old (college-bound) by the time the PTB allow the bubble to fully deflate to buy a house for their families. Some have been victimized by their landlords as these greedy pigs collect rent, but fail to pay their mortgages.
With all due respect, your admonition that these people “get a life” shows a lack of perspective and maturity. Nobody is saying we’re worse off than people in the developing world, but when responsible people are consistently being sacrificed for the benefit of fraudsters and gamblers, we have every right in the world to express our displeasure.
ca renter, I’m so glad you said what you said. Thank you.
CA Renter is my hero. Well stated amigo.
CA Renter–Sounds like you are in for the long term. Here is my thoughts–prices have came down between 20-60%. You have been extremely patient, have sucessfully timed the cycle and have saved money renting all along–time to cash in some chips–greed can work both ways. If you are in for the long term and expect to stay put, waiting much longer and trying to time the exact bottom would be foolish. The most important thing to is to find the right house in the right school district–just my opinion.
CA Renter,
I suppose this would be as clear as you say if this whole bubble thing was a black and white case of rent skimming landlords and a bunch of millionaires who bit off more than they could chew while belittling you for not doing the same. But as someone who has worked with people who have gotten in over their heads, I can say it is not the neat and packaged stereotype you present. Just a few examples of situations I have dealt with: An unsophisticated mother of a special needs child who was talked into refinancing her house by a crooked broker; a truck driver divorcing his wife who put $400,000 down on a 1.2 million Temecula house that recently comped out at $440,000; A young police sergeant and his recently laid off wife who put down $50,000 on new construction now way underwater but can’t afford payments on a house that is now to small for their growing family. I have also dealt with many cases of financially illiterate minorities who were preyed upon by more sophisticated members of their own ethnic group to buy or refinance homes on predatory terms. None of these people were fraudsters or gamblers, and they are all experiencing the emotional pain and difficult decisions that Erica described. There is more than enough pain to offset the displeasure you have described to go around on both sides of the equation.
So I have been reading a lot of comments on this blog as well as others about the greed and foolishness of others that have cause your predicament. While you are certainly more articulate than most, it never seems to stop and usually comes out as over generalized negative, bitter stereotypes that are repeated over and over, year after year, ad nauseum. For folks like Erica, myself, and others, it does get a bit old. And for JTR, who utilizes this web site as part of marketing his excellent service in buying and selling real estate, I am amazed at his patience in putting up with it.
It would be nice if we could have an intelligent discussion about real estate here in 2010 without hearing the usual one liners and words or phrases such as “fraudsters, gamblers, pigs, banksters, slimey realtors, criminal NAR, evil flippers, etc. At some point, hopefully soon, it becomes time to move on.
When you have a personal connection to some of these unfortunate situations, I can see how it makes you more sympathetic. But, with all due respect, what is so special about the truck driver buying a $1.2 million house in Temecula, or a young cop deciding to buy a brand new house, or people refinancing their homes who now can’t afford to pay it off? I don’t feel sorry for these people. If that makes me callous, so be it.
I also think Erica’s comments are completely misplaced. A housing bubble blog is not the place to chastise people with opinions on current economic policies. Most of the readers here seem to be educated and successful, and don’t need to be talked down to. We all know there’s starving people in the world and we’re generally fortunate, so that lecture is better served for a child who isn’t finishing their vegetables.
Kingside,
I appreciate the situations in your post, but it really substantiates what I’m trying to say. Every single one of the people in your post are suffering because of decisions **they** made. Whether it’s an assumption that appreciation was going to save them from their unwillingness to budget, or their refusal to acknowledge that hardships will occur to most people in life, each of these people were willing to take on more debt than they could repay under reasonable assumptions (which include budgeting for job loss, sickness, and divorce, **rate changes in their adjustable-rate mortgages,** and **depreciation**).
That’s exactly what makes some of us so upset. We’re trying to live responsibly, and it’s the profligate spenders who fear no debt who continue to negatively affect the lives of those of us who are trying to live without debt and/or without onerous mortgages. Their “rights” to overpay for a house, and be saved from the natural consequences of their actions infringe upon those of us who are trying to live responsibly.
In each of the situations you’ve described, they would probably all be best served by walking away and letting the lenders (not taxpayers!) take the losses. For those who are **true victims** of mortgage fraud — like instances where the mortgage brokers did a cut-and-paste job on an application, changing the terms **after** it was already signed — there absolutely needs to be some kind of recourse.
I have always said the lenders were more responsible than the borrowers for the credit bubble. Still, it does not absolve anyone from taking responsibility for their own actions. Foreclosures are a gift to over-extended borrowers. It enables them to walk away and have a fresh start after a few years during which they should re-evaluate what they did to cause their situations, and work on ways to mitigate those same behaviors in the future.
Yes, we need much greater consumer protections, especially in areas that can have such a tremendous impact on families and their communities. Mortgage loans should be very closely regulated, and should NOT be made available to people who cannot manage them properly. Additionally, 20% down payments should be the rule, and any special “low down payment” programs should be very limited in size and scope, and should be made available only to certain people who are willing to go through a very vigorous underwriting process.
ca renter, Erika was clearly referring to the poster who considers everybody who saves money to be stupid. Unless you were actually that troll, you probably shouldn’t take her comments as directed at you.
Her point is something I’ve seen all too often lately. It’s one thing to say the government is screwing honest people and rewarding deadbeats – I say that all the time. It’s another thing to say “therefore saving money is stupid”. At some point it gets old. Just like the trolling post at the top that reads “So why doesnt everyone quit paying and get a loan mod?” If you’re going to be a one note pony, there’s no need to chime in every day with your same troll.
The irony is these series of disasters come precisely from badly thought out consumer protection. It’s no coincidence that the vast majority of foreclosures are in states like CA and FL that are no recourse. This is an explicit law passed for the sole purpose of “consumer protection”. All the tax benefits, FHA, Fannie and Freddie, and the trillions of dollars the government throws at housing is for benefiting the consumer. Did you get that letter saying your credit card will be increasing your interest rate to 29.99%? That’s because under new *consumer protection* laws for credit cards, they’ll no longer be able to raise them in the future so they’re doing it right now.
Anyone who asks for these laws is part of the problem.