There are several articles out today commenting on the decline on foreclosure activity.
The ivory-tower types are quick to give credit to the CA Homeowners Bill of Rights, or to short sales being the preferred method of liquidation, instead of foreclosure.
Here are excerpts from this latimes.com article entitled, “California’s Housing Recovery May Gain Momentum, experts say”:
While dramatic, the drop is part of a general decline in foreclosure actions over the last year as banks look toward short sales and loan modifications as alternatives to seizing homes.
“You will see a continued decline in defaults from regulator activity, new laws and from the economy,” said Dustin Hobbs, a spokesman for the California Mortgage Bankers Assn. “As long as the economy, and especially the housing market, continues to slowly heal itself, you will see fewer and fewer defaults.”
Madeline Schnapp, director of economic research for ForeclosureRadar, believes the low levels of foreclosures will continue.
“The plethora of anti-foreclosure laws have been very effective in reducing foreclosure activity to what you are seeing today,” she said.
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We are being led to believe that people have stopped defaulting, and anyone in trouble is taking the friendlier short-sale exit.
But short-sales and REO sales have both dropped off substantially:
NSDCC Detached-Home Closed Sales Jan 1 – Feb 7th
| Year | Short-Sales | REO Sales | Non SS/REO |
| 2011 | |||
| 2012 | |||
| 2013 |
Looking at this chart, it looks like the banks ramped up cancellations in September or everyone just started making their payments:
How can any of the “experts”, or the media look at the data and not wonder if lenders have deliberately stopped foreclosing? The banks have us right where they want us – feeling good about buying homes again, and the media is blindly pushing the new drug.
I guess it is possible that once the CA Homeowners Bill of Rights was announced in August, that lenders figured that they would start over on foreclosures and short sales. But here we are in mid-February and no uptick in the numbers.
Or use the CHBR as an excuse?
Since the crash of 2008, the fed allows banks to value their collateral at the mortgage price, not actual market value.
Because of this, banks (and Fannie/Freddie) have figured out that it looks much better on their books to just hold thousands of non-performing mortgages, and just write off the missed payments each month, than to foreclose on thousands of homes and write off from $100,000 to $millions$ for EACH property!
The administration is turning a blind eye to this problem because all of these free renters have LOTS of extra money to spend on consumer goods. Ever wonder why the employment rate is rising and the economy is shrinking while consumer spending and restaurants are still healthy?
Thank you Jim for writing this. The truth needs to get out.
It’s a wonderful time to be a deadbeat in SoCal.
With the market being so grossly manipulated, it has to cause would-be buyers to put off buying (at least those that do any reading and analysis). I certainly have and will continue to rent. I’m wondering if we’ll ever see a free-market, or anything close, in our lifetimes.
@Kelja
I am acutely aware that the market is being manipulated, but that is not what is keeping me from buying.
I am watching list prices shoot up +10% this year compared to last (on the same houses!!) but my salary has remained the same. We WANT to buy because we want to fix our “rent” for the next 30 yrs, but there just isn’t much wiggle room in the budget because we are getting squeezed from so many angles unrelated to housing prices. Day care, car bills, health insurance, groceries, gas, so on and so on.
Thankfully, our rent is really low for our area but regardless we still want to buy now.
the market is what it is…you choose to participate or sit on the sidelines. If you bought in North county in 2012, you are probably already sitting on a 10-15% equity for doing nothing. Next bubble is forming, your choice to participate or watch others pull in some big gains.
@sdbuyer —- your comment, “If you bought in North county in 2012, you are probably already sitting on a 10-15% equity for doing nothing.” explains exactly the mindset that led to the housing disaster. Remember, this has happened & recently — when the government came up with that 8K tax credit for new buyers a couple of years ago. Initially, prices on homes did go up, about the same amount as the tax credit. However, those buyers within a short span of time found themselves underwater on their mortgages. The only reason prices are up right now is the banks are restricting supply by not foreclosing on those who are not paying their mortgages. They can do that because they because of phoney-baloney accounting, money from the taxpapers and the low interest rates. Problem is: very few move-up buyers because too many don’t have enough equity, high un-employment, higher, more sane, lending requirements. Market may head up but it won’t be a repeat of last time. If interest rates go up, look out!
& @ just some guy ——— I’m there with you. We rent and fortunately have a pretty good rent for the area. I’d like to fix our housing cost and have the piece of mind having a place of my own would give me. At least, renting gives us flexibility should we want to move. I think if you do buy, you have to be sure you’ll be staying put for at least a decade of so.
This is nothing new really. It’s why I bought stocks in January-March of ’09 and houses starting in Sept. of ’10. You can lace ’em up and participate, or kick back and spectate. Free will, brother, free will.
I don’t ponder whether I like or dislike “manipulated” markets because I’ve never encountered on that cares about or responds to my feelings.
Bad news: Markets are manipulated.
Good news: You can choose sides.
Hence,
Good news: Markets are manipulated.
Better news: JTR can help you!
Thanks Booty, and yes, I can help!
We pondered the market manipulations here for years. The indicator to consider is the number of big-time Wall Street players who are buying up the cheap stuff. They must know that the government has their back.
Once you realize that, you might as well lace ’em up!
Did you see this one today?
SAN DIEGO Former San Diego Mayor Maureen O’Connor acknowledged Thursday in federal court that she misappropriated $2 million from her late husband’s charitable foundation due to a gambling addiction in which she won more than $1 billion but lost even more over nearly a decade.
O’Connor made the acknowledgement in an agreement with the government to defer prosecution for two years while she attempts to repay the debt.
O’Connor was the Democratic leader of California’s second-largest city from 1986 to 1992. The two-term mayor was elected San Diego’s first female leader after eight years on the City Council. She was married to Robert O. Peterson, founder of the Jack-In-The-Box restaurant chain.
Prosecutors said her gambling winnings amounted to more than $1 billion from 2000 to 2009 but she lost more than that.
Her defense attorney estimated the debt at $13 million.
O’Connor gambled in Las Vegas, Atlantic City, N.J., and San Diego.
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The UT was reporting that Romney bought her oceanfront house, but he bought the 3,009sf house next door for $12 million in May, 2008.
O’Connor listed her 1,985sf house two months later for $11,900,000, but no luck as the market was tapering off. It showed up again as a five-second listing in 2010, and called a short sale, even though the loan amounts looked to be only $2,350,000.
It closed for $2,400,000 on September 2, 2010.
The banks were probably fine with that, but how/why does she agree to sign off $5 to $8 million in equity??? Who was the buyer, Guido the Loan Shark?
I know she was a Democrat, but was it that bad living next to Romney?
Not only are they canceling sales they won’t even file the NOD anymore. No sense in selling their defaulted inventory for a loss when they can just manipulate inventory and wait for higher prices. It will be interesting to see what their process will be once they hit breakeven on the note and the deadbeat owner doesn’t sell immediately, do they start foreclosing in earnest to get their principal back?
They have a whole list of can-kicking excuses too:
“We’re re-tooling to comply with CHBR requirements”
“We’re being cautious to comply with every Dodd-Frank rule.”
“We’re hoping to modify every mortgage possible, and will exhaust all resources to do so.”
“We are re-structuring our short-sale department in order to pre-approve more borrowers.”
In the meantime, they aren’t paying property taxes and insurance, and the defaulters living for free at least keep the house occupied and hopefully stop it from getting ransacked. They will have every property on several automated-valuation programs, and the minute they have a consensus of 10% to 15% equity, all of a sudden their foreclosure machine will start working again.
Blind as a bat:
http://www.mortgagenewsdaily.com/02142013_realty_trac_foreclosures.asp
While overall activity was down in most states, the size of the national decline can be traced to California where a new law caused a 39.5 percent decrease in filings from December to January making it the first time since January 2007 that California did not have the largest number of filings in the country.
RealtyTrac Vice President Daren Blomquist said the new legislation that became effective on January 1 profoundly altered the U.S. foreclosure landscape.
Dubbed the Homeowners Bill of Rights, this legislation extends many of the principles in the national mortgage settlement – including a prohibition on so-called dual tracking and requiring a single point of contact for borrowers facing foreclosure – to all mortgage servicers operating in California.
In addition the new law imposes fines of up to $7,500 per loan for filing of multiple unverified foreclosure documents.
As a result, the downward foreclosure trend in California accelerated into hyper speed in January, decisively shifting the balance of power when it comes to the nation’s foreclosure activity.
@renters feel your pain..we can name a million excuses why the rally is a bear market rally…look at 2010…however, this time look at land available in sd, look at rates, look at the fed wanting to buy tons of mortgage back securities till 2015, where do you think this is going to come from. If you have bid on homes recently, there are tons of offers, hedge funds in play. When this bubble pops it will certainly be more dramatic than ’06…but unitl then lace up.
Greetings from Idaho
I personally have been knee deep in data mining and spreadsheets using them to target logical points in consideration of testing price in the various markets I follow or trade, particularly currencies. Over the last several years my attention to RE is in the San Diego area although I live in Idaho, this is due to having daughters and son-in-laws in the business.
Applying the same technical and conceptual techniques I use in trading to the RE market in San Diego. I’ve come up with my best guess scenario for the bigger picture which will no doubt effect RE in Idaho with some of the same characteristics.
Inventory in SD or the lack there of has been sinking and is very near a technical logical point of turning around. I believe there are very high odds of a modest but significant amount of increase of inventory and
price which may hold up over the next 2 years, 1 year with higher odds.
A few of the catalyst I see from my view point is the large percent of investment capitol acquisition used for flipping with the prospect of dumping when conditions prove favorable coming back on the market. With end of season prices closing equal to or higher than the last 2 years peaks I’m looking for some of the 1st stage investment inventory to come back on the market. Perhaps this will encourage banks to loosen their grip on some of their inventory as well.
Also, when I analyze the bond market, yield curve and ultimately interest rates, what I see is a market acting as it should in comparison to it’s makers. Nothing really alarming and all things considered the demand point in housing sells can absorb higher interest rates with in reason and too may prove to be another catalyst creating urgency for a great season or 2 where conditions
of favorable although tight financing, supply and demand cross paths. This is great news for Jim, however for buyers and sellers it all depends on individual circumstance,needs and goals.
@Lloyd – almost everyone who follows real estate, and that means most participating in this discussion here, agree the real estate market is being heavily manipulated. The area where we disagree is whether this fact is something that should keep you from participating in the market.
You state, “Inventory in SD or the lack there of has been sinking and is very near a technical logical point of turning around.” I’m someone that likes to look at technicals as well but when a market isn’t responding to free market forces, I don’t think technicals are reliable.
The inventory of available houses on the market is determined by the banks. We know there’s a big shadow inventory out there: those that have stopped paying on their mortgages and whose homes the banks are not foreclosing on. I have friends who sit in a very nice home on a golf course in RSF who stopped paying on their mortgage 10 months ago. They paid 2.4 million for the home a few years back and tell me the bank has little interest in foreclosing. They live mortgage free banking and now have about 11K more cash a month and a very nice home to live in. They also tell me they are not the only ones in the area to have done this.
Those who have stopped paying on their mortgages will most likely never catch up, and have no incentive to do so. When, and if, the lack of inventory causes home prices to rise to the point where homes sit at breakeven or better, banks will foreclose like crazy. They are just waiting to pounce.
You also don’t think a rise in rates will affect sales. Of course, higher rates impact affordability of real estate directly. If rates do rise significantly – a point or two from here – I believe the market will slow and prices will drop. Last week the rates did rise, but only a bit, and mortgage apps dropped by 10%. Just saying.
Of course, no one knows where the market will be. I am dismayed to see so much governmental interference and so little care for the renters.
Kelja- I do appreciate your thoughts, however I don’t think I am clear on your statement; (when a market isn’t responding to free market forces, I don’t think technicals are reliable.) vrs (most participating in this discussion here, agree the real estate market is being heavily manipulated)
When it comes to the decision to rent or buy it’s certainly based on each circumstance of a family or person means, needs and goals. Personally I rent and will probably be doing so for some time to come. The RE market has bubble written all over it and I wouldn’t ignore it, so if I were on the spot in making that decision for others it would be stay renters to the great majority 95%+. On the other hand if you have the means and want to buy a “home” with it not overly weighted as an investment by all means do so.
I in no way want to portray myself as a fortune teller just sharing some market theory I use in my trading. Trading is all about testing price at some line in the sand and mixing any relevant fundamentals observed then deciding to pull the trigger or not.
RE is a market and sophisticated investors/traders sell when a reasonable margin of profit is reached. I am just saying I think the natural cycle of how markets work, manipulated or not there are high odds of considerable inventory to come on the market supplied threw hedge funds, other sophisticated investors/traders and even banks. That could even have an effect on the small majority who are not that far from breaking even or have a small profit to put there RE on the market.
Although interest rates will have an effect I’m looking for them to go side ways and continue on the down side after this short dead cat bouncing 4.25% perhaps and until price proves it I’m not betting we have seen the lowest interest rates as of yet.
For Jim and others in the profession I see the potential of a perfect storm of inventory, buyers, low int. rates, higher prices and Jims favorite bigger commissions.
Watch yourself fella.
Don’t you like 50% more cash Jim…lol
Or do you have other objections to my post.
I mean no offense to anyone, I have enjoyed
reading your blog and have followed it from
almost it’s beginning.
My intentions are not to encourage or persuade
anyone from buying or selling but rather to encourage
doing so with objectivity and with all factors of reason.
The bottom line is no one knows whats beyond the right of the charts, good or bad. We all just have to row our own canoe across the pond, just don’t forget the oars.
Kelija,
When you say you “believe” the market will slow and prices will drop, it comes off like you “hope” the market will slow and prices will drop.
Jims favorite bigger commissions.
Don’t you like 50% more cash Jim…lol
It is a very sensitive topic, because I try to impress my potential clients here that I am a successful agent, yet people want to make cracks about the money. I make a decent living but I earn it by putting in 100-hour weeks – there isn’t an easy dollar in there.
When you make comments like those that are on display for my potential clients to read, they might come to the wrong conclusion like I’m a lazy money-grubbing agent (the typical reputation).
I put more into this than I get out of it. It’s a struggle to find the right balance, knowing that the wrong comment by me or you could send me back to the starting gate.
Now to your theories Lloyd.
The market is ripe for analyzers, but you have to also factor in the emotional quotient that plays a major role in the decision-making.
The buyers who are making the market are those the furthest detached from the charts – they are buying because it feels good. Those of us analyzers have to find ways to make sense of our transactions in that environment, and rarely is it a match.
In other words, the market is being made by the people with the fewest analyses/charts.
BTW, thanks for being here so long – is this the first time you commented?
@JtR
“In other words, the market is being made by the people with the fewest analyses/charts.”
So very true, unfortunately. I guess you could say that about almost every financial market.
Regarding Lloyd’s comment….
“Don’t you like 50% more cash Jim…lol”
I might be wrong, but I think that statement is a reference to the Jimmy Fallon – Capital One commercial campaign pitting Fallon against a stubborn baby. At least, that is what I had pictured in my mind while I was laughing.
@jtR —- “In other words, the market is being made by the people with the fewest analyses/charts.”
In ordinary markets, I’d agree with that statement. However the elephant in the room (or elephants) are the Fed and the government. The market today is distorted.
For those two thoughts to be connected, you would be implying that because the government’s distortion, the market is being made by those with more analyses/charts?
Kelija,
When you say you “believe” the market will slow and prices will drop, it comes off like you “hope” the market will slow and prices will drop.
“believe” me “hope” does not have any factor in my statements at all, and certainly with the thought of “hoping” people loose more money in this market as if I gain from it. I gain nothing, nor do the many in my own family tree who have lost untold amounts. It’s more a reminder market mechanics 101.
The truth is markets go up and they go down, as we all I’m sure can agree on that. With proper “due diligence” and an honest appraisal of ones own circumstance, needs, goals and realistic approach with the understanding this is a market their is no reason not to buy as a long term investment, however do it wisely by learning from your own mistakes of the past concerning this market if any, as well as learn all you can from others. It’s really about possessing realistic expectations and honest objectivity. In the end we are responsible for our own decisions good or bad. As a long term investment buy, however doing so as a short term profitable round trip the odds are against you. If this is something you are looking to do and have the cash/financing available Jim would be a good place to start with the understanding of no guarantees and that is a realism of the end game.
I have the highest respect for Jim and his integrity. I forwarded this article to my son-in-law who is a long time broker in SD, though he might learn something.
https://bubbleinfocom.wpenginepowered.com/2013/02/04/selling-season-is-here/
“Selling Season Is Here” and this was his response.
I’ve met this guy and like him and have read many of his posts a long while back.
Thanks for sending this over! Great advice he gives buyers.
So, the bottom line of my sharing is I think SoCal and Cal in general is going to have some surprising activity due to the missing link of inventory and have stated the reasons why, and by all means if you have desire, opportunity and the circumstance to buy you or your family a home for the long run by all reasonable means do so.
I know how hard RE agents work for their money, and it is definitely not “money for nothing chicks for free”…lol (this blog we all enjoy for instance is work)
That’s cool.
Is this the first time you have commented?
The RE market has bubble written all over it and I wouldn’t ignore it, so if I were on the spot in making that decision for others it would be stay renters to the great majority 95%+.
Except that in a lot of San Diego it’s cheaper to buy than rent. The rent to monthly payment ratio is at historical lows. Investors are coming in, because there’s money to be made either flipping or as rentals. Take it from Jim, the buyers aren’t no money down, FHAers here but people with large down payments or all cash.
I might have made a comment back when you posted the snake ridden/infested home here in Idaho.. That was over the top for sure.
I’m really not the posting type and a bit out of my comfort zone but couldn’t help myself on this topic. I have very few blogs I choose to invest my time in and enjoy reading some what regularly. I’m not a blogger or a writer for sure, I’m a currency trader so my frame of reference is more than likely way out in left field of what most have experience and understanding and that is simply how markets work in the real world, and I mean no disrespect to anyone in my stating that. Statistically that is the truth and I just thought I would share and provoke some food for thought.
I am probably 1 of the few who thinks/guesses/tea leaves that the bond market “is not” going to drop off the planet in my opinion and actually the odds are better than not we may see new highs in that market keeping lower sustained int. rates.
The currency wars will have a natural effect concerning higher prices in the RE market due to dollar value lowered among other conditions such as the obvious demand for RE inventory itself. “high demand point”
The SD inventory is where I really jump off the cliff with the idea and possibility of 35-100%+ weekly avg. inventory added and available from where it sets over the next 1-2 years, yes it could take longer to reach those numbers but that’s not what I am seeing today. This is calculated from SD data specifically so where it relates to other CA cities in general I have no guesses. There is simply a lot of cash “Short Term Investment” dollars sitting in RE “not owned” by the banks and on it’s way to this market (supply and profit potential). Could I be wrong, absolutely.
The devil is really in the details and this is just a summery aspect of what I see and believe are some high probabilities before logical price points have been confirmed.
Anyway I am hoping at this point no one feels the need to take the Lloyd’s name in vain, I mean no harm…lol Although I may not comment on here again I certainly plan on continuing to follow your blog Jim, you do provide a great service and I do enjoy the post and comments.