There is some short-term predictability to real estate.
Because foreclosures have a minimum 111-day notice period before becoming a trustee-sale candidate, we can check the foreclosure rolls and recent trends to anticipate the possible REO activity coming for the North SD County Coastal region.
Here is the historical pace of SFR trustee sales in NSDCC that went back-to-bene:
Year
REOs
Avg-per-Mo.
2007
137
11.4
2008
257
21.4
2009
284
23.7
2010 YTD
201
23.7
Here’s a chart below of the recent monthly totals – though the categories aren’t directly related, it can give you a feel for the current trends. It looks like fairly steady production, with some uptick lately – maybe some mid-summer banker vacations slowed things down a bit?
Month
Back-to-Bene
New REO listings on MLS
MLS REO listings closed
Apr
22
18
14
May
35
15
23
Jun
12
17
19
Jul
17
22
11
Aug
24
23
16
Sep MTD
18
11
3
Totals
128
106
86
Mo. Avg.
24
19
16
The number of SFRs with active notices:
NOD = 253 (54% received their first notice in the last 60 days)
NOT = 365 (Only 28% received their original NOT notice in last 60 days)
Total = 618
The loan-modification candidates are among the 618, so we may not see them come to market for a while, if at all (some will stick). If half of the 618 defaulters actually hit the court house steps, and wound up going back-to-bene, it would mean that the current count would take about a year to liquidate – which seems like the same pace we’ll been seeing. It would take a change in the ‘delay-and-pray’ tactics being employed by servicers to change the course.
There have also been 553 cancellations this year too, which you would think were due to successful short sales. But in the MLS there have only been 151 short sales closed, and another 125 currently marked contingent or pending – which is only half of the cancellation total (though not every agent marks their listing in the ‘sales restrictions’ box, the MLS criteria used to count here). The banks/servicers might be letting a couple of hundred people float around for now?
REO listings vs Other detached listings that have closed since April 1st:
Category
REO
Other
# of closings
86 (7%)
1,182 (93%)
Avg SP
$895,126
$1,091,991
Avg SP:LP
99%
96%
Avg $-per-sf
$302/sf
$383/sf
Avg DOM
41 days
67 days
Trying to gauge how many buyers are left isn’t easy. But if banks/servicers decide to rush the exits, they would provide welcome relief for those trying to find attractively-priced inventory, and put a little pressure on the elective sellers who are currently happy to ignore 7% of the market. If the REOs doubled or tripled in North SD County Coastal, it would likely shake things up, with the biggest impact being on the elective sellers who wouldn’t be getting as lucky as they are now.
Readers regularly send in articles for us to examine here – keep them coming!
Tom sent in an article from realestatechannel.com that was also referenced in a mortgage blogger’s post which Gordon sent in, looking for thoughts – thanks to the both of you!
At first glance it appears that there must be a wide-spread conspiracy between banks to withhold their foreclosed properties from the open market, in order save the world from total collapse. When you read the two articles linked above, that’s the impression the authors got from the chart.
COMMENTS:
1. Two years ago I paid to advertise on RealtyTrac, hoping to cause their members to utilize my services. As inquiries came in about properties marked as being in foreclosure on the RealtyTrac website, I noticed that there were many houses which had sold 6+ months prior, and others that had multiple entries.
When asked, a RealtyTrac employee confirmed that they receive their data from multiple sources, and they don’t screen it for accuracy. I quit advertising, and haven’t trusted their data since.
2. Readers gravitate to the sky-is-falling, tabloid-style soundbites. People think that there are conspiracies in play, and they want the dirt on them.
Yet authors, bloggers, etc. are struggling to get the truth on what’s really happening with foreclosures, and the real estate market in general. As a result, stories are written based on questionable data or theories/hunches hoping to appeal to the readers’ desires, but who knows how close they are?
3. San Diego is not on this chart, and I don’t know anything about the markets that are mentioned. But I did research on our bank-owned properties, based on the owners listed on the tax rolls for SFR and condo properties in San Diego County:
SD REO Prop Owner
# of REOs
Fannie Mae
899
Freddie Mac
334
Wells Fargo
267
JPM Chase
118
BofA
102
IndyMac
59
We know that California is a tenant-friendly state with regards to eviction, so I’m going to cut the banks some slack during the first three months of REO ownership. Once they get the occupants out, it still takes time to assess the value, complete repairs, and general processing.
Let’s look at REOs owned since before May, 2010 that aren’t on the open market – if there are a bulk of those, then the conspiracy would be clearer.
A review of the individual properties owned by Bank of America revealed the following:
1. Nine of the 102 were owned in trust for an individual, not a foreclosure – leaving 93 REOs.
2. Twenty-five of the properties were former Barratt homes that BofA is in the process of selling.
3. That leaves only 68 individual BofA REOs in the county. Of those, only seven had been foreclosed prior to May, 2010, and how many of those were probably tenant-occupied? To me, it doesn’t look like BofA is trying to withhold properties.
How about Fannie Mae?
I checked the first 50 properties from the alphabetical list of Fannie REOs that were foreclosed on prior to May, 2010. Forty of the fifty had made it to the open market. Not as proficient as BofA, but they are probably less nimble about the evictions too.
It makes for a sexy story to say that the banks have this huge shadow inventory of homes waiting off-market, but until somebody besides RealtyTrac verifies it without a doubt, I’m going to be skeptical, at least with bank-owned properties in San Diego County.
There has been a rebound lately in the number of weekly trustee sales resulting in REOs, but still relatively low numbers overall, compared to where we think they should be:
Below is the quarterly chart for the last three years. Even though the foreclosure moratoriums are mostly expired, there haven’t been more properties getting foreclosed than in 2008 – but add in the cancellations and it looks to be about the same (or more) volume as 2-3 years ago. Are banks letting people off the hook, or did defaulters get their loan mod? Or were they just bluffing?
But you might be able to say that the servicers must be getting sharper on price, and/or the investors are getting more optimistic – the third-party purchases have gone up substantially since 2008.
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:
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.
Eric at the North County Times mentioned the increase in Bank of America notices of trustee sale being sent out. Click here for link to full article.
The notices went to 230 homeowners in North San Diego County, a 69 percent increase from February.
Wow, will there will be more SFR short sales or REOs in North SD County Coastal?
There were 22 new notices sent out in February, and 23 in March to SFR borrowers from Carlsbad to La Jolla – not quite a meltdown yet. There are also some familiar faces on the lists as well, and we won’t count those as new meat.
If you’re trying to gauge your chances of finding a seller who is distressed, here are the number of detached properties that have listed on the MLS as short sales (SS), bank-owneds (REO) or regular sellers (Reg.), plus the number of SFR trustee sales completed that either went back-to-bene (BTB) or were bought at the steps by a 3rd party – since March 1st:
Town or Area
Zip Code
SS
REO
Reg.
BTB
3rd
Cardiff
92007
2
1
16
0
2
Carlsbad NW
92008
3
3
25
3
2
Carlsbad SE
92009
8
5
88
3
3
Carlsbad NE
92010
2
4
18
4
1
Carlsbad SW
92011
9
1
54
2
0
Del Mar
92014
0
0
36
0
1
Encinitas
92024
7
3
76
4
2
La Jolla
92037
3
3
94
2
1
RSF
67+91
0
4
77
2
1
Solana Bch
92075
2
2
23
5
0
RB West
92127
12
5
85
7
1
Carmel Vly
92130
7
5
96
0
1
’10 Total
All
55
36
688
32
15
’09 Total
All
44
15
747
28
2
This year has seen a relatively big increase in short-sale and REO listings compared to 2009, but they’re still only 12% of the total listings that have been coming on the market recently in San Diego’s North County Coastal region. With only 1-2 properties being sold at the trustee sales per day, there isn’t much to look forward to this summer. The regular sellers won’t be feeling much pressure from distressed neighbors, and likely to hang around waiting…..for something.
Though everyone wants to “steal one from the bank”, if you’re looking to buy in North SD County Coastal (Carlsbad-to-La Jolla), you’ll find few opportunities to snag an REO sale.
Have there been more REO listings coming on the market in 2010?
Detached
2010 REO listings
2010 Total listings
REO Percentage
All SD County
303
2,255
13.4%
NSDC Coastal
12
338
3.6%
No flood yet. What’s the difference in pricing?
Detached
2010 REO listings
2010 Total listings
All SD County
$199/sf
$296/sf
NSDC Coastal
$311/sf
$515/sf
Buyers see the REO listings, and dig the improved pricing – but there aren’t enough to go around. We don’t necessarily need more REO inventory, just more REO-type pricing on regular listings.
Our old friend in La Costa Oaks keeps evolving. Out of the 20 homes on the street, four have been foreclosed, and two sold short (one of those is still pending). But on November 9th there was a sale of a 3,345sf house on the culdesac that was head-scratcher:
Notices of default and trustee deeds fell a combined 22 percent in November from October.
Data from the San Diego County Assessor showed trustee deeds — the last step in the foreclosure process — dipped 17 percent from October to 1,128. Year over year, trustee deeds are down 1 percent.
The number of NODs filed was down nearly 25 percent to 2,182 last month.
Despite the month-to-month drop, November nearly doubled the number of NODs filed in the same month last year when there was a foreclosure moratorium in place from mortgage giants Fannie Mae and Freddie Mac.
The month-to-month dips can be attributed to some seasonal declines. On average, over the past five years, foreclosure filings have fallen 10 percent from October to November.
Year to date, there have been 4,189 fewer trustee’s deeds filed this year than 2008.
From sddt: “Even with NOD numbers virtually flat with 2,880 in October and 2,875 in September, 2009 is on pace to break 2008’s record-breaking 34,069 NODs filed in a single year. With two more months to go, 2009 has racked up 33,904 NODs and has averaged 3,390 per month.”
According to foreclosureradar.com, about 25% of the trustee sales in October were purchased by third parties on the courthouse steps.
There were 877 REO listings inputted onto the MLS last month.
