In the San Diego-Carlsbad-San Marcos residential market, the level of underwater mortgages leveled off in the second quarter, according to a real estate services company.
CoreLogic reported 165,650 of all residential properties with a mortgage (28.1 percent) were in negative equity, in the San Diego County market. In the first quarter, the level was 28.2 percent, or 165,582 properties, according to the new analysis.
Also in the San Diego market, an additional 4.8 percent — or 28,352 residential properties — were in near negative equity for second quarter 2012 compared to 4.9 percent, or 28,889, in first quarter 2012.
Negative equity, often referred to as “underwater” or “upside down,” means that borrowers owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination.
JtR: Including homeowners without a mortgage, those underwater are fewer than 20%.
There have been 9,410 San Diego short-sales and REO listings closed this year, or 6% of 165,650.
Bulk investors are willing to pay up to 95% of value for Fannie properties in Florida? All we hear is that foreclosures sell for 20% to 30% off – but rarely do you see actual evidence. Hat tip to Daniel for posting this, from thelatimes.com:
A San Diego real estate investment firm has won an auction of nearly 700 homes owned by Fannie Mae in Florida, part of a government initiative to sell vacant and distressed properties to investors.
Pacifica Companies, which describes itself on its website as a “privately held, vertically integrated real estate developer, owner, investor and investment manager” was announced as the winner of the auction by the Federal Housing Finance Agency, regulator for Fannie Mae and Freddie Mac.
The firm paid $78.1 million, or close to 96% of the properties’ estimated worth.
Nearly 2,500 properties up for sale by Fannie Mae have been split up into eight geographic pools, and winning bidders are required to rent out the homes for at least three years.
The sale is a pilot program by the agency, intended to help clear the large numbers of foreclosed homes on the books of the two mortgage giants without crashing the housing market’s recovery.
Several hedge funds and other big investment groups backed with Wall Street money have lined up to bid on the homes. These big investors view a lucrative market for foreclosed homes converted to rental properties.
But groups associated with real estate agents, particularly the California Assn. of Realtors, have objected to the bulk sales of foreclosed homes to big firms, complaining that the housing market is actually suffering from a dearth of properties and could absorb more foreclosures.
Several Fannie Mae properties in the Inland Empire are up for bid. The winning bidders in other geographic areas will be announced in coming weeks, the federal housing agency said.
We’ve gotten the feeling that banks aren’t pursuing defaulters much after hearing anecdotal evidence about homeowners who aren’t getting calls from their banks and servicers, even though they’ve been behind in their payments for over a year.
Here is supporting evidence, a review of the 7,000 clients at youwalkaway.com, seen at mish’s site:
Once the California Homeowners Bill of Rights takes effect on January 1st, banks won’t be able to file a foreclosure notice until all loan-mod attempts have been exhausted – which would give them permission to let everyone ride.
How many short sales and REOs are happening in the elite areas of NSDCC? 12%
Detached Sales between April 1 and July 31 in Del Mar, Solana Beach, RSF, and CV:
Type
# of Sales
Avg $/sf
% of Total
SS & REOs
48
$297/sf
12%
Non-SS&REOs
338
$431/sf
88%
Total
386
$414/sf
100%
Here is the map of where the SS & REOs were located:
There are 135 SFRs on the NOD and NOTS lists, so there will be a few more dripped out, but for the most part we are in a non-distressed market – at least as far as we can tell.
Will banks keep the pressure on those behind in payments?
The North County Times threatened to throw me in the hoosegow if I ever published any of their articles again at bubbleinfo.com.
Even though I had helped their reporter Zach Fox with a number of his reports, and the NCT themselves were running my blog on their website without permission, they threatened to send the suits after me if I ever did it again.
So instead I’ll direct you to CR, who apparently has permission.
This is a must-read for those who are concerned about the local shadow inventory:
The Phoenix/Maricopa County area is larger than San Diego County (30% more houses and condos) but similar in bubble fever. These are thoughts given at a Phoenix realtor conference, highlighted by the REO count in the middle – excerpted frommoderntimesmagazine.com:
“Nobody saw the housing crisis sooner, talked about it more vigorously, or was more right about the housing bubble than Dean Baker,” Holtz-Eakin said.
So where does the soothsayer who predicted the crash in 2007 stand on the current state of the Phoenix housing market?
“The idea that we are going to get back to the prices at the height of the bubble is just ridiculous. What we can expect to see is moderate price increases of around 3 or 4 percent. But the general direction is going to be upward,” Baker said. “We have turned the corner, but we still have a lot of issues going on and we are far from saying everything is good.”
Better news to be sure, but not exactly what the crowd wanted to hear.
Michael Orr, who, like most Valley wonks, is ‘too-close-for-comfort’ cozy with most builders and real estate brokers, was a bit more enthusiastic, and said fears of banks dumping thousands of homes on the market and causing another precipitous drop are unfounded.
“The direction is very positive and there is no sign of a large addition supply coming in. Almost everybody has this fear that banks are going to flood into the market. I actually count these homes, everyday,” Orr said. “They don’t have a very large number and even if they do dump them it will have very little effect on the market.”
Orr said banks own about 5,700 homes in Maricopa County right with 2,700 of them in the midst of being sold already and the other 3,000 are being prepped for sale.
What those in the real estate industry need to be worried about, Orr said, is delinquencies. There are still many out there who remain dangerously close to foreclosure thanks to the bubble or that they qualified for a loan they would never be able to afford long-term.
Listings of foreclosed properties have fallen in 17 of the last 19 months through July, according to research firm Zelman & Associates. Listings are down 47% from their October 2009 peak and by 23% from one year ago. Banks are selling more homes to investors at courthouse trustee sales, rather than taking them back themselves. They’re also approving more short sales, where the property is sold for less than the amount owed.
“If you don’t understand the shadow inventory, it’s very ominous and concerning,” says Ivy Zelman, chief executive of Zelman & Associates. “But if you understand the flows and how it is brought to market” it looks less intimidating, she says.
Nationally, Barclays estimates that the number of bank-owned properties will decline a bit more this year, before accelerating next year to a peak of around 575,000 in early 2014.
Meanwhile, as the shadow inventory has dropped over the past year and as banks and states have slowed down the process, demand has picked up. That’s especially the case for foreclosed properties at low price points that can be held as rental properties by investors, or rehabbed and flipped for a profit. Investors are raising billions of dollars to buy homes in hard-hit markets such as Phoenix, Atlanta, Las Vegas, and across Florida and California.
“What most of the bears aren’t focused on is understanding demand,” says Ms. Zelman. This is one reason she’s turned bullish. Her most recent forecast calls for a 5% increase in home prices this year, a change from her initial forecast of a 1% decline when the year began. Getting a handle on demand “allows us to have a complete picture of the housing market.”
Finally, shadow inventory isn’t a national phenomenon. Instead, it is heavily concentrated in particular markets—and within those, in particular submarkets. To the extent banks to ramp up the foreclosure process, the shadow is more likely to resemble a “tornado” than a “flood,” as it will strike particular communities while bypassing others, says Jeffrey Otteau, president of Otteau Valuation Group, an East Brunswick, N.J., appraisal firm.
So when people use the “shadow inventory” trump card to argue that housing is poised for another decline, it’s important to be precise about which market they’re talking about. “It’s not like you have all these properties distributed all across the country,” says Michael Sklarz, president of Collateral Analytics, a Honolulu-based research firm.
Buyers in Santa Monica, Calif., shouldn’t “expect a flood of foreclosures to come onto the market,” says Mr. Sklarz, even if neighborhoods just a few miles away in South Los Angeles do face a larger backlog of foreclosures. “You really have to look at it market by market,” he says.
This excerpt is from part 2 of Nick’s three-part series:
LOS ANGELES — U.S. homeowners are getting better about keeping up with their mortgage payments, driving the percentage of borrowers who have fallen behind to a three-year low, according to a new report.
Some 5.49 percent of the nation’s mortgage holders were behind on their payments by 60 days or more in the April-to-June period, the agency said. That’s the lowest level since the first quarter of 2009.
Home prices need to recover further for the delinquency rate to decline.
Foreclosure hotbeds Arizona and California each saw marked improvement during the second quarter. California’s mortgage delinquency rate fell nearly 22 percent to 6.13 percent from a year earlier, while Arizona’s declined 21 percent to 6.14.
TransUnion’s research is culled from its database of 27 million anonymous consumer records.
Let’s do the math to examine the gap between 60-day-or-more delinquencies and defaulters in SD, and try to estimate how much longer this environment will last.
According to city-data.com, there are 362,087 homes with mortgages in San Diego County. Using the California ratio of 6.13%, there should be around 22,195 homes that are more than 60 days late on their mortgage payments.
How many are in default currently in SD County?
NOD = 5,097
NOTS = 6,036
Total = 11,113
Only half of the delinquents have been served their notice. With servicers now claiming to process loan-mods within 30 days, if you are more than 60 days late, aren’t you already on your way out?
Foreclosed in 2012 = 4,000/7.5 months = 533 per month (July had 482 foreclosures)
Short sales closed in 2012 = 4,962 = 662 per month (In July we closed 712 short sales)
Bottom Line:
The combined foreclosure/short-sale machine is clearing roughly 1,200 properties per month, which means that we have about 9-10 months’ worth of known defaulters to clear out. But we can estimate that are another 11,000 roughly who are more than 60 days late, and with the California Homeowners Bill of Rights expected to stall the machine further, I think it is safe to say that we have a minimum 2-3 years left of this madness. It wouldn’t surprise me if it ends up 5-10 years either!
MCLEAN, Va., Aug. 8, 2012 — Freddie Mac released today its U.S. Economic and Housing Market Outlook for August showing why the so-called shadow inventory might not be as foreboding as many thought and an important reason why is the rate at which excess housing is being absorbed.
Outlook Highlights
The Freddie Mac House Price Index for the U.S. showed a 4.8 percent gain from March to June 2012, the largest quarterly pickup in eight years; the national index posted a June-to-June rise of 1 percent, the largest annual appreciation since November 2006.
Rental vacancy rates have fallen to 8.6 percent, the lowest since the second quarter of 2002. The for-sale vacancy rate has dipped to 2.1 percent, the least since the second quarter of 2006.
Nationally, the for-rent market now appears to be in relatively good balance, with the rental stock close to overall rental demand, resulting in “normal” vacancy levels.
This continuing shrinkage in excess vacant stock is important because it means that in most markets the REO homes on the for-sale market are not competing with an oversized vacant housing inventory.
Even if national indexes dip in the seasonally weak autumn and winter months, the declines probably won’t be big enough to erase the good second-quarter news on home values.
“While the shadow inventory persists, there is an important difference in today’s market compared with those of recent years and that’s the substantially reduced amount of excess vacant housing. The housing recovery may finally be coming out from the shadows.”
It has been mind-blowing to find out that lenders and servicers have been offering defaulted borrowers up to $45,000 to work with them in a variation on the old Cash for Keys program.
But sessions at the recent SourceMedia Loss Mitigation Conference in Dallas made this development more understandable.
It used to be that lenders might pay a borrower to leave the property. This was called Cash for Keys and generally involved a payment of $2,000 or $2,500, something to allow the borrower to get a lease on an apartment to move into.
Nowadays, with people staying in homes for years after defaulting, it takes a lot more than $2,500 to get borrowers to leave. But the much higher payments aren’t wholly the result of calculation on the borrowers’ part.
Nowadays such programs are called Cash for Cooperation. The idea is to get the borrower’s cooperation in disposing of the property as quickly as possible, such as through a short sale. The borrower lists the property promptly and acts as a kind of property manager through the process. When the sale is made, she gets her check from the lender and moves on with her life (hopefully not using it as a downpayment on another mortgage!).
It’s good, though, that the lender and the borrower are cooperating to dispose of the property quickly and with the minimum amount of disruption. Lenders benefit by having their costs lowered. Attendees of the meeting heard that recoveries are at least $25,000 more on a short sale and in some cases over $50,000. Obviously these are properties that are still worth a fair amount despite their default status.
Attendees heard from Daren Blomquist, vice president at RealtyTrac, that short sales have nearly overtaken REO. In the first quarter of 2012, he said, there were 123,778 REO sales and 109,521 short sales, a boost of 25%. Short sales outnumbered REO sales in 12 states.
Prices, however, dropped 10% to the lowest since 2005. Short sales closed an average of 319 days after the foreclosure start, he said (that was as of the second quarter of this year).
Some of the states with the biggest percentage jumps in short sales include Kentucky, Delaware, Connecticut and Rhode Island.
Of the 8.5 million foreclosure starts since the beginning of the housing crisis, REO still commanded 49% of the market, to 20% for short sales, RealtyTrac data show.
It’s clear, though, that the preforeclosure solution is the one lenders and borrowers prefer.
Also in the San Diego market, an additional 4.8 percent — or 28,352 residential properties — were in near negative equity for second quarter 2012 compared to 4.9 percent, or 28,889, in first quarter 2012.
LOS ANGELES — U.S. homeowners are getting better about keeping up with their mortgage payments, driving the percentage of borrowers who have fallen behind to a three-year low, according to a new report.
