Trustee deeds in San Diego County are down almost 60 percent from June 2011, and one local expert said that’s “really pretty amazing.”
Trustee deeds — the final step in the foreclosure process, transferring ownership from the delinquent borrower back to the lender or to a third party — were filed on 527 properties in June, 3.3 percent less than in May and 59 percent less than June 2011, according to the San Diego County Assessor’s Office.
Notices of default (NOD) — which initiate the foreclosure process by registering that a borrower is in arrears of payment — rose 3.2 percent from May to June, and 2.9 percent from June 2011 to June 2012.
Alan Nevin, principal at The London Group, said the county is headed toward normalcy in the foreclosure numbers, with one footnote: short sales are taking their spot.
“The foreclosure rate is really pretty amazing,” Nevin said. “If you go back to normal times, there were about 200 to 250 foreclosures. We are almost back to normalcy. There’s one footnote – the lenders are pressing the route of short sales instead of foreclosures because they lose less money.”
The county will wait a couple years to reach normal numbers again, Nevin said.
“We’re not out of the woods yet,” he said, because about 35 percent of sale closings are distressed properties. The number of short sales is going down, Nevin said, and will continue to as the underwater borrowers from 2005 to 2007 work through the system.
Nevin said he doesn’t follow notices of default because they “rarely” make it through the whole process to foreclosure.
The flow of transactions can be managed by the lenders and there’s still a “fair amount” of bank-owned properties, but the number can be manipulated, said Norm Miller, a professor at the Burnham-Moores Center for Real Estate at the University of San Diego.
“I think what’s going on is that the banks and lending institutions have become more proficient over the last year. They are able to go ahead and foreclose on properties and write off their losses,” Miller said. “The rate of foreclosures is going down – that’s not new, it has been going on for a while. There are [fewer] defaults and [fewer] foreclosures out there and that’s good.”
Miller said it wouldn’t surprise him if NODs stayed in the 1,200 to 1,600 range for the next several months and the county may reach “long-term equilibrium normal” in one-and-a-half to two years.
San Diego is better positioned than other parts of the country because the county did not over-build, said Nevin, and ran out of product in 2006.
“We’re not seeing any new production so the market will heal itself much faster than other places,” Nevin said. “The only thing stopping a massive surge in home buying in the county of re-sales is a lack of confidence in the economy.”
If the national economy saw job growth of a quarter million jobs three months in a row, Nevin said that could bring up the confidence level.
“Eighty thousand to 90,000 jobs every month doesn’t get anybody excited,” he said.
He expects the foreclosure numbers to stay down and “hover” around the area where they are now “and that’s fine,” he said.
CR had a similar post today about the Phoenix market: