Those who are underwater aren’t “trapped” in their homes, they are free to move.
The system has been very generous, and even if the Congress doesn’t extend the debt-tax relief, the banks will be processing short sales to enable the underwaters to move – without having to repay the debt.
The homeowners that choose the short sale – it is a choice, you can always pay it down – will probably have their credit banged up along the way and won’t be purchasing a home concurrently. But that’s OK, with the the supply-and-demand curve around here needing more supply and less demand, we welcome the sell-only short sellers.
However, as the media keeps hyping the real estate comeback, the underwater homeowners who can make their payments will be more inclined to not default/short-sale, for these reasons:
There aren’t cheaper alternatives in the same area.
Let’s wait a little longer, equity might be right around the corner.
Save face, and credit.
Those who have waited this long will continue to ride it out, and short-selling should diminish in the areas that see real appreciation happening. So charts like these below shouldn’t cause a lot of alarm in the NSDCC, where there are only 398 SFRs with NODs and NOTs on file currently, and half of those are in Carlsbad.
Let’s note that 91% of the San Diego homeowners with negative equity are making their payments!
I was quoted yesterday by an AP reporter, who was doing a story on the last month’s sales that included a very sexy headline, “California Home Prices Rise 19% in October”:
Jim Klinge, a broker in north San Diego County, said one of his customers bid on 14 properties before finding a $400,000 home in Vista last month. “You can’t say there’s no inventory, it’s just that it’s getting bought up right away,” he said.
We discussed a few other points:
1. I said that there has been a shortage of active listings, not overall inventory.
The number of MLS listings in San Diego County this year is only about 9% fewer than last year – here are the YTD counts of SD listings through November 14th:
2009 – 64,300
2010 – 67,000
2011 – 62,800
2012 – 56,900
In spite of the fewer choices, year-over-year sales have jumped 12%:
San Diego County Sales, Jan 1 – Oct 31:
Year
Jan-Oct Sales
Avg $/sf
2009
29,295
$221/sf
2010
28,146
$238/sf
2011
27,524
$228/sf
2012
30,930
$233/sf
The combination of 9% fewer listings and 12% more sales has been enough to dramatically increase the competition for the good buys, and expect that to continue – or get more intense – for as long as rates stay in the 3%-4% range.
In the springtime we should see 5-10 offers on every decently-priced listing.
2. I said that there has been a late-season surge this year.
NSDCC detached-home sales kept accelerating August, rather than tapering off, and the momentum has been continuing through the fourth quarter – there have been 95 closings this month, which is 34% higher than the same period last November, and that’s not counting the late-reporters:
At this rate we should get off to a quick start in 2013.
3. I said that people are buying a mortgage, more than they are buying a house.
The payments are so low that people are compromising on quality of home and/or price to get in now. This will likely lead to noticeable price appreciation; probably 5% to 10% over the next 12 months in select neighborhoods.
4. I said next year will be extremely active, and be in a full-frenzy state.
The election is out of the way, rates continue to hit all-time lows, the media says that the economy is improving, flippers are making a killing everywhere, and the buzz is back throughout the populace.
I’ll go into more detail in the coming days and weeks!
This song was released in 1970 and was inspired by an act of police brutality at an anti-war rally in Berkeley – plus here’s Marvin’s famous rendition of the SSB at the Forum:
After two foreclosures and two bankruptcies, Hermes Maldonado is as surprised as anyone that he’s getting a third shot at homeownership.
The 61-year-old machine operator at a plastics factory bought a $170,000 house in Moreno Valley this summer that boasts laminate-wood floors and squeaky clean appliances. He got the four-bedroom, two-story house despite a pockmarked credit history.
The last time he owned a home, Maldonado refinanced four times and took on a second mortgage. He put a Cadillac and Mercedes-Benz C300W in the driveway and racked up about $45,000 in credit card bills and other debts. His debt-fueled lifestyle ended only when he was forced into bankruptcy.
His reentry into homeownership three years later came courtesy of the Federal Housing Administration. The agency has become a major source of cash for so-called rebound buyers — a burgeoning crop of homeowners with past defaults who otherwise would be shut out of the market.
“After everything that happened, thank God I was able to buy another house,” Maldonado said in Spanish. “Now, it’s good because the interest rates are low and there are lots of homes.”
La Jolla, CA—Southern California home sales rose sharply in October as move-up buyers joined investors, shifting the mix of homes selling up a notch as foreclosure resales hit a five-year low. The median price paid for a home rose nearly 17 percent from a year earlier, a real estate information service reported.
A total of 21,075 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 18.0 percent from 17,859 sales in September, and up 25.2 percent from 16,829 sales in October 2011, according to San Diego-based DataQuick.
Last month’s sales were the highest for the month of October since 22,132 homes sold in October 2009, though they were 11.1 percent below the October average of 23,709 since 1988, when DataQuick’s statistics begin. The low for October sales was 12,913 in 2007, while the high was 37,642 in 2003.
The median price paid for a home in the six-county Southland was $315,000 last month, the same as in September and up 16.7 percent from $270,000 in October 2011. The September and October medians are the highest since the median was $330,000 in August 2008. The Southland median has risen or held steady month-to-month for nine consecutive months and has increased year-over-year for the past seven months.
The median price and other price measures are rising mainly for two reasons: First, higher demand, triggered largely by ultra-low mortgage rates, has coincided with a dwindling supply of homes for sale, which pushes prices up. Second, this year there’s been a big change in the types of homes selling: Discounted foreclosures are a smaller share of sales, while move-up homes are a larger share, which puts upward pressure on the median price.
“Watching the market rebalance itself is fascinating. In some categories and in some neighborhoods, demand outstrips supply, pushing up prices. In other areas, the market is still largely dormant. Low interest rates are a huge factor, where mortgages are available, which they aren’t for a lot of potential buyers,” said John Walsh, DataQuick president.
Foreclosure resales – properties foreclosed on in the prior 12 months – accounted for 16.3 percent of the Southland resale market last month. That was down from 16.6 percent the month before and 32.8 percent a year earlier. Last month’s level was the lowest since it was 16.0 percent in October 2007. In the current cycle, the foreclosure resales hit a high of 56.7 percent in February 2009.
Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 26.0 percent of Southland resales last month. That was down slightly from an estimated 27.6 percent the month before and up from 25.4 percent a year earlier.
Credit conditions didn’t appear to change much in October, though the share of purchase loans that were “jumbo” hovered near a five-year high.
Yesterday we saw how the number of short-sale listings were dropping off around our north county coastal region, in spite of the expiring relief on debt-tax.
In the New Age of Coddling, we have seen the government devise several programs to rescue distressed homeowners, who enter the ‘Modification Waterfall’, where every cure is applied until one sticks. If all loan-mod attempts fail, then the next recommendation is to affect a short-sale. We’ve been hearing all year that lenders have converted to short-sales as their primary method of disposing of defaulters….by have they?
Around NSDCC, it appears that lenders took their foot of the gas altogether.
We stormed into 2012 with guns a-blazing, with both new listings of short-sale and REOs increasing rapidly in the first quarter. But then it looks like somebody pulled the plug – for the last two quarters both REO and short-sale listings have been trending lower:
If lenders don’t threaten to foreclose, there is little to no incentive for defaulting homeowners to short-sale – the free rent program is their preference!
But there are two possibilities that could cause a dual decline of REO and SS listings:
Lenders stopped threatening to foreclose.
Homeowners starting paying again, once they heard that the market might be coming back.
Either way, the distressed listings appear to closing out.
Of the 783 houses for sale today, there are 19 REO and short-sale listings – or 2.4% of the inventory!
A brief tour through the end of Del Mar Mesa Rd., where 13 lots are selling next to the future Alta Del Mar. The ADM semi-custom tract home prices will range from $1.5 to $2.4 million, and their estate lots will range from $700,000 to $2 million.
It is incredible to think that there will be about 150 homes sell in this immediate vicinity for $1,500,000+ (and most over $2,000,000), during the next few years:
The extension of the debt-tax relief act is still up in the air.
There have been several bills submitted, and everyone from the N.A.R. to the nytimes.com thinks there is a good chance that our Congress will extend it….but will we need it?
Did the threat of it expiring cause a flood of short-sale listings to hit the market recently? Not really, for the September/October period, there were fewer short-sale listings than in previous years.
NSDCC Detached-Home New Listings, September/October
Year
Sept/Oct SS Listings
Sept/Oct Non-SS Listings
SS/Total %
2009
67
698
8.8%
2011
82
674
10.8%
2012
55
575
8.7%
With recent upbeat news about the housing market, those who are underwater and hanging on this long are thinking that if they wait just a few more months or years, it will be different – and prices might go high enough for them to make some money!
After the next high sale in each neighborhood, expect that there will be 2-3 more new listings hit the market, looking to capitalize – but only if they can get their price.
P.S. Of the 55 listed this Sept/Oct, only six are still for sale.
After two foreclosures and two bankruptcies, Hermes Maldonado is as surprised as anyone that he’s getting a third shot at homeownership.
