Cancellations are Cooking

We’ve heard the rumblings about Bank of America stepping up their foreclosures, and low and behold, I got another REO listing assigned to me today. 

I promptly rejected it, which I figured would secure my spot at the bottom of their list, and boom, they sent me another one, which means 2-3 in the last week when I’ve only been getting one a month.  Does it mean something is cooking?

Here are the overall results from the last 12 weeks for all trustees:

San Diego County Trustee-Sale Results, Weekly

Cancellations are due to short sales closing, and loan modifications becoming permanent. There have been 2,623 cancellations over the last 60 days, and in the same period there were 925 short sales that closed on the MLS, or 35% of the total cancellations. Can we say that about 2/3’s of the cancellations are due to loan modifications becoming permanent?

Yes, the loan modders might make their way back to market over the next few years, but for now the extend-and-pretend program is working nicely.

Here is the REO assigned to me today:

The Pressure is on Sellers

Surfer Steve wondered what we can expect in the post-housing-tax-credit environment.  To qualify for the federal tax credit, transactions have to be secured by Friday, and to get the state cheese, buyers need to close their sale and apply before the money is gone – and that’s predicted to happen before the end of May.

In other words, the tax-credit era is almost over, at least for now.

The winding down of the tax credits has diverted some attention away from the fact that mortgage rates haven’t gone up much since the Fed quit buying MBS at the end of March.

Between the two, the only pressure on buyers is to purchase a home before their lease runs out. 

There is a resounding theme among buyers: They’ve waited this long, they aren’t going to compromise now – even if it means having to sign another lease. 

If they do buy, it’ll be because the house suits the majority of their needs, and can be bought for an attractive price.  But I think we’re in for good news the rest of the year.

Doesn’t there have to be more sellers who NEED to sell, and will be forced to get real about their price?  I think so, and while they might be basking in what they think is the prime selling season right now, within the next 30-60 days it will be become more obvious to them what we already know – they are an over-priced turkey.

Look for more sellers to be inching their way towards the exits, and if the banks start unloading, it could get hysterical.  Market conditions are pretty good right now – if there were more quality homes for sale at price points around today’s comps, they’d be selling. 

If there was a surge of listings priced 5% under comps (bank-owned or otherwise), they’d be gobbled up in a hurry.  But that’s about 10% to 20% below where most sellers are listed now – we’ll see if they can handle the truth.


Let’s keep a running tally of new pendings/contingents up to April 30th, to see if there is a last-minute surge to buy before the housing-tax-credit deadline.

Detached listings:

Listing Status All SD NSDCC
ACT 6,610 1,396
PEND 3,901 425
CONT 2,557 157
SOLD, Last 30 days 1,636/$252psf 221/$376psf
SOLD, Last 60 3,433/$248psf 417/$383psf
SOLD, last 90 4,782/$245psf 555/$383psf

A pricing convergence; the all-county trend is upward, while north coastal pricing is coming down. The Active-to-Pending/Cont ratio is cooking in both; 1.02 in the county, and 2.40 in north coastal.

Bye-Bye Four Seasons

From the latimes.com:

A long-running dispute over who would manage the Aviara resort in Carlsbad, Calif., has been settled, with Park Hyatt emerging as the new operator. By summer, it will no longer be known as Four Seasons Resort Aviara.

Last year, real estate investors who own the hotel said Four Seasons, which managed the property on their behalf, was spending too much money keeping up appearances in a depressed market. They wanted to eject the fancy hotelier and bring in another operator. Four Seasons, the owners said, was to blame for financial mismanagement and breach of its fiduciary duties to the owners.

Four Seasons, which has a reputation for luxury, denied the allegations and declined to leave the Aviara. Four Seasons is known for securing elaborate contracts with owners that ensure it will be able to maintain hotels according to its standards.

An arbitration panel found this week that Four Seasons did not breach the management agreement or its fiduciary duties to the owners, led by Broadreach Capital Partners. The panel determined, however, that both parties contributed to the demise of their business relationship and that the management agreement should be terminated, according to a joint statement by Four Seasons and the owners.

Hyatt Hotels Corp. said Tuesday that Broadreach and co-owner Maritz, Wolff & Co. selected Hyatt to manage Aviara as part of its luxury Park Hyatt portfolio. The company expects to assume management of the hotel June 21, when it will become known as the Park Hyatt Aviara Resort.

From the U-T’s version:

The arbitration panel concluded that both sides had “contributed to the demise of the business relationship.” As part of the termination agreement, Broadreach was ordered to pay compensation to Four Seasons. According to previous court documents, Four Seasons signed a 30-year contract in 1995 to manage Aviara and had three 20-year options to renew.

More Substitution Effect

A report on the Rosarito Beach/Baja California market, from the latimes.com:

There’s the gigantic Residences at Playa Blanca, which advertises “24-hour gourmet dining” and a “world class spa” on banners next to the highway, but which remains frozen in construction, scaffolds and pipes lined up on the grounds. The fortress-like condos at Las Olas Mar y Sol, which sit next to a steel skeleton structure, are surrounded by piles of trash.

Perhaps the best-known such flop is at Trump Ocean Resort Baja, a luxury hotel-condo project developed by Irongate Wilshire and PB Impulsores. Flamboyant real estate tycoon Donald Trump licensed his name to the resort, whose units sold for as much as $3 million in splashy pre-construction sales events.

But the project was never built. All that’s visible now is a fenced-in hole, faded pink Trump Baja banners waving in the breeze. Buyers, who are out $32.2 million in deposits, sued Trump and the developers last year.

Some observers say the downturn in Baja is just a temporary blip and buyers will come back soon.  Rosarito Beach is on the coast, after all, and only about half an hour from San Diego. Prices on three-bedroom condos on the shore start at around $280,000, a fraction of what they’d cost in the U.S.

But the promise of cheap real estate just across the border isn’t quite as appealing when there’s plenty of it to be had in the U.S. too.

“What’s hurting us is that now you can buy a nice Vegas condo for $150,000,” Baja real estate agent Katz said. “We used to be that.”

Crazy, Mixed-Up World

Rob Dawg left this on CR:

This slow decline in the inventory is especially concerning with the large reported inventory and 8.0 months of supply in March – well above normal. – CR

“Inventory” c.2010 is not inventory c.2007. There are so many new considerations I’m not sure 8.0 months means what it used to mean.

• shadow inventory
• 2 minute MLS listings
• the return of pocket listings
• permanently on market second houses
• extended escrows for short sales
• double counting flips

There are surely more.

He also was the guy who said all previous assumptions don’t apply, which is more on the same theme – today’s market is unrecognizable when comparing to historical norms.

What are other curveballs we can add to the same list?

  • Realtors ignoring the rules/laws, and no enforcement anywhere.
  • Qualifying for a mortgage is tough, with down pmts required.
  • Fewer comps to help guide valuations.
  • Appraisals being done by people who are strangers to the area.
  • Sellers who are greatly motivated to NOT sell.
  • Defaulters lasting months or years with little threat of foreclosure.
  • Banks under no pressure to foreclose.
  • Flippers making six-figure profits (or more) regularly.
  • Government spending trillions with little obvious impact.
  • Unemployment/economy having little obvious impact on sales.
  • Millions of short sales with no rules/regulations/enforcement.
  • No big public protest.

For those of you who are repulsed by this list, I salute you.  If there is a big protest, let’s join in – I’ll be the guy in front, looking for a TV camera….

For those of you who are thinking about forging ahead with the search for a home to buy – in spite of the crazy, insane conditions, I empathize with you.  I promise to help you at least find a house that will last you a long time – hopefully forever, so you can quit thinking about it!

For the record, here are Sandicor’s detached-home listings in North SD County Coastal – the total amount of new listings taken in the period Jan 1 to Apr 22nd (though Sandicor takes out the wihdrawns from previous years, add 100-200), plus the number of solds:

Year Total Taken Closed/$psf

In the peak frenzy years we had very low inventory stoked with exotic financing – an alluring combination. Today we have a low inventory count combined with what seems to be lower pricing, which helps compensate the buyers for the tougher financing available. But today’s decision-making is complicated by a third component – frustration with interpreting the crazy conditions mentioned above. Buyers want to buy just so they can quit thinking about it, and move on with life.

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