The lack of supply on the MLS is becoming a serious problem. Buyers are getting burnt out and frustrated because they are unable to make a deal. Bidding is so aggressive — and so foolish — that 50% of deals fall out of escrow due to either a low appraisal or the borrower’s inability to obtain financing. The demand is still tepid by historical standards, but the supply is so constricted that lenders have considerable leeway to increase their foreclosure liquidations and still enjoy rising house prices. Perhaps as a response to current market conditions, lenders increased the number of properties they bought at auction and that they allowed to go to third parties by more than 10% over June’s numbers.
Before we make too much of the new numbers, Sean O’toole reminds us these numbers are volatile:
“While we are as curious as anyone to see the direction foreclosures are headed each month, it is important to keep things in context,” stated Sean O’Toole, Founder & CEO of ForeclosureRadar. “It is not unusual to see the number of Foreclosure Filings or Foreclosure Sales go up or down 10 percent or more each month. Whether it’s due to the length of the month, holidays, or internal delays at a lender, trustee, or posting company, it is completely normal to see fluctuations. What’s important is the bigger picture. This is the primary reason why we have made trend charts freely available. So take a minute and click the links below to view all the foreclosure stats and trends for each state we cover. Then drill down to any county, city or ZIP code – seeing the big picture is that easy.”
Lenders held steady to the rates at which they are filing notices. Perhaps they believe they have arrived at a new equilibruim that allows them to dispose of REO without crashing prices.
The consistent but slow liquidation of REO is ongoing.
Very soon lenders will reach a point where inventory is only what is held in their processing pipeline — a pipeline that continues to grow as they continue to increase the amount of time they hold their properties.
Orange County
The trends in Orange County were much the same. Foreclosures were up overall, but sales to third parties actually declined.
The increase in filings was more pronounced as well.
Santa Clara and Alameda Counties
Though the raw numbers were still small, the increase in Santa Clara County is remarkable.
Alameda County saw a similar increase.
Connection between foreclosure and MLS inventory
Lenders are the housing market. Through direct sale of foreclosures and indirect approval of short sales, they control most of the housing market. Perhaps as prices move higher more discretionary sellers will come to market as they emerge from the depths of their debts, but until then, lenders control the supply of housing available on the MLS. One thing that jumps out from these numbers is the dramatic decline in properties that are going back to the bank on a year-over-year basis. Each chart shows that lenders simply stopped foreclosing in February which makes for fewer REO. The removal of this REO is responsible for the lack of available housing now.
It’s also remarkable that a cartel of lenders has been so successful at limiting inventory. Cartels are inherently unstable as each member has incentive to cheat to take advantage of higher prices. Perhaps the resolve of some of the members may weaken as prices rise, and they will bring more properties to the market to hasten their liquidations. Right now, they are surprisingly successful at managing their dispositions. After holding it together for over five years now, I begin to wonder if they might pull it off and avoid a Las Vegas like crash in our fragile coastal California markets. So far, they have.
Lost in Wonderland
Whenever I come across a really, really large HELOC abuse property, I Google the name of the former owner. I have found restauranteurs, lottery winners, and other not-so-famous former owners who just blew the money. Today’s featured property used to be owned by a person who shares the name with a founder of Wonderland Bakery. Perhaps it’s just a coincidence, or perhaps she overextended herself to start a business for her daughter and lost her house. Apparently, the bakery business isn’t doing well enough to pay off the $4,162,000 debt she racked up on the property.
- This property was purchased on 8/9/1996 for $985,000. The owner used a $765,000 first mortgage and a $220,000 down payment.
- On 5/14/1999 she opened a $100,000 HELOC.
- On 2/6/2002, long before she founded the bakery, she refinanced he first mortgage for $1,106,000. The Corona Del Mar lifestyle can get expensive.
- On 6/6/2002 she obtained a $250,000 HELOC.
- Then on 4/21/2005 she refinanced with a $2,421,875 Option ARM and obtained a $678,125 HELOC. That’s nearly $2,000,000 in mortgage equity withdrawal in one pop. Wonderland Bakery opened in the fall of 2005. Coincidence?
- She wasn’t done borrowing. On 10/24/2006 she refinanced with a $3,300,000 first mortgage.
- On 5/2/2007 she obtained a $862,000 HELOC. Both of the last two loans from WAMU.
- Total mortgage debt was $4,162,000. Total mortgage equity withdrawal was $3,397,000.
That’s a lot of dough.
We're sorry, but we couldn't find MLS # U12003186 in our database. This property may be a new listing or possibly taken off the market. Please check back again.
Proprietary OC Housing News home purchase analysis
250 HAZEL Dr Corona Del Mar, CA 92625
$2,855,000 …….. Asking Price
$985,000 ………. Purchase Price
8/9/1996 ………. Purchase Date
$1,870,000 ………. Gross Gain (Loss)
($78,800) ………… Commissions and Costs at 8%
============================================
$1,791,200 ………. Net Gain (Loss)
============================================
189.8% ………. Gross Percent Change
181.8% ………. Net Percent Change
6.5% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$2,855,000 …….. Asking Price
$571,000 ………… 20% Down Conventional
4.14% …………. Mortgage Interest Rate
30 ……………… Number of Years
$2,284,000 …….. Mortgage
$552,673 ………. Income Requirement
$11,089 ………… Monthly Mortgage Payment
$2,474 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$714 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
============================================
$14,277 ………. Monthly Cash Outlays
($1,659) ………. Tax Savings
($3,210) ………. Equity Hidden in Payment
$837 ………….. Lost Income to Down Payment
$734 ………….. Maintenance and Replacement Reserves
============================================
$10,980 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$30,050 ………… Furnishing and Move In at 1% + $1,500
$30,050 ………… Closing Costs at 1% + $1,500
$22,840 ………… Interest Points
$571,000 ………… Down Payment
============================================
$653,940 ………. Total Cash Costs
$168,300 ………. Emergency Cash Reserves
============================================
$822,240 ………. Total Savings Needed
The property above is available for sale on the MLS.
Contact us for a comparative market analysis, a cost of ownership analysis, or information on how you can make an offer today!
OC Housing News FREE Guides!
Click on the book cover for more information.
Nearby Foreclosures
Gain a competitive advantage over other buyers. By locating distressed properties -- before they hit the MLS -- you can discover where tomorrow's REOs and short sales will appear. Most of these properties are not listed on the MLS, but they will be soon. Research properties in advance and get a jump on your competition. Don't miss out on another deal because you couldn't act quickly. Use this tool to your advantage! The red properties are already bank owned. As soon as REO asset managers prepare them for sale, they will be on the MLS. Get ready! The green and blue properties have owners who are not paying their mortgages. They may be offered as short sales, or they may go through foreclosure and become REO. Either way, they will also likely be available on the MLS soon. Find your next home! Be prepared to offer on these properties by researching them in advance or risk losing out to buyers who are have done their homework. Start your research today! To find distressed properties, enter your desired location and press search. Scroll through list by pressing "next."  |
$3,400,000 3631 SEAVIEW Ave |
0.12 miles 4 bd / 3.25 ba 3,400 Sq. Ft. |
|
 |
$3,900,000 221 POINSETTIA Ave |
0.12 miles 5 bd / 4.75 ba 4,044 Sq. Ft. |
|
 |
$3,995,000 223 POINSETTIA Ave |
0.12 miles 4 bd / 4.5 ba 3,203 Sq. Ft. |
|
 |
$5,900,000 119 SHORECLIFF Rd |
0.16 miles 4 bd / 3 ba 3,000 Sq. Ft. |
|
 |
$3,179,000 134 SHORECLIFF Rd |
0.19 miles 4 bd / 2.75 ba 3,400 Sq. Ft. |
|
 |
$3,198,000 427 HAZEL Dr |
0.21 miles 4 bd / 3.5 ba 4,100 Sq. Ft. |
|
 |
$2,500,000 503 HAZEL Dr |
0.25 miles 5 bd / 3 ba 3,320 Sq. Ft. |
|
 |
$4,250,000 182 SHORECLIFF Rd |
0.27 miles 4 bd / 3.25 ba 3,400 Sq. Ft. |
|
 |
$2,295,000 520 DE ANZA Dr |
0.41 miles 8 bd / 5.5 ba 4,300 Sq. Ft. |
|
 |
$3,795,000 220 HELIOTROPE Ave |
0.55 miles 4 bd / 3 ba 3,652 Sq. Ft. |
33 Responses to “Resale supply is coming, lenders increase foreclosures 10% in July in California”
Sorry, the comment form is closed at this time.
“…Total mortgage debt was $4,162,000. Total mortgage equity withdrawal was $3,397,000…”
$3,397,000 is such a staggering number.
I can’t conceive blowing thru that much cash in such a short time frame.
In my world $3.4mm literally represents a lifetime of work, slow saving/investing.
Maybe these folks live in a parallel cosmic galaxy. Wherever it is, I would sure like an invite some time. Must be a real fun time.
The scope and scale of HELOC abuse in California is unbelievable. If you dropped a zero from the number, it would still be huge. And if you did, she would just be a typical Ponzi rather than a superstar.
I have profiled thousands of these properties over the last five years, and I only profile one per day. I miss thousands more of these as the wash through the system. The scope of the abuse is amazing. Everyone was doing this. And when you see some of these people that extracted over a million dollars — or in this case more than three million dollars — the scale of the abuse is jaw dropping.
Media: She should get a GSE backed loan medication and the conforming limits should be raised. She’s on the loan without a husband, so as a single mother the govt should support her to keep her home. With the govt. help, the children will be homeless.
Any backed govt loan will be remove the liability from the bank and transferring it to the taxpayers. I don’t see any justification for that action, but it will likely occur due to congress passing an unread bill that has that provision, likely on page 8349 out of 12985 page bill.
The approver(s) of the loan should be personally liable for these type of loans. In the old days, the banker owned and approved the loan. Bad debt came out of his pocket. Now: shareholders technically own the bank or liability, the bankers control and reap the profits but don’t share in the liabilities. Time to claw back the profit and bonus.
Yes, all accountability has been removed from the system, so it gets more and more corrupt. Some of the most incompetent bankers who lost billions of dollars are still in positions of power at the major banks collecting obscene bonuses for taking the country to the edge of the financial abyss.
Larry, check it out…..Kiesel gets ‘schooled’ by Shiller.
”those California communities, no offense Mark, they get a little bubble psychology, and we see a little improvement… there have been so many repetitions, California is the worst in terms of repetitions of bubble psychology.”
Shiller goes on to add that the good scenario for housing is that it goes nowhere, as that’s been the historic long run trend.
Maybe Kiesel is having second thoughts after this encounter.
http://www.businessinsider.com/shiller-kiesel-housing-battle-2012-8
Shiller really gets it.
One thing I would point out is that these communities have such a long tradition of being ridiculously inflated that it becomes the norm there. When I did a rental parity study of Corona Del Mar, at the bottom of the last recession from 1993 to 1999, it was still 84% above rental parity. Right now it’s less than 50% above which makes it a bargain… I guess.
Kiesel will probably be made right by the ranks of greater fools which are sure to follow.
Do places in CDM etc ever reach rental parity? Would the location premium keep that from happening?
It has been trading above rental parity consistently since 1988 which is as far back as my records go. Right now is the smallest premium over rental parity ever recorded. Of course, that is largely due to 3.5% interest rates.
I’m interested in CDM, and if I bought there, it would be with fingers crossed that the purchase wouldn’t ruin me.
“I’m interested in CDM, and if I bought there, it would be with fingers crossed that the purchase wouldn’t ruin me.”
That’s always the risk with a beach community. Most people put down huge amounts with the belief their money is as safe as a bank. We all know that isn’t the case anymore.
Follow on to OCHN Aug 13. “Conventional wisdom wrong, foreclosures don’t reduce neighborhood values”
“A Property Value Protection Ordinance in San Diego, proposed by CPI and ACCE, is aimed at reducing the negative impacts of foreclosures on surrounding neighborhoods and the city budget. With your help, the goal is to move the ordinance through city council this Fall. ”
Web site:
http://stopbankblight.org/
This group is in San Diego, but is very interesting none the less. If this ordinance is passed it would seem to me that it would give much more incentive for the banks to step up and sell existing REO. Any similar groups in Orange County?
I wonder if the study by the federal reserve was designed to deflect criticism from groups like that. Unmaintained foreclosures in rough neighborhoods are a problem. They become a focus for crime and illegal squatters. It’s difficult to say they lower property values because in these neighborhoods, the values were already low.
The mainstream media needs to spin the bad foreclosure numbers or their bottom-is-in meme will be debunked. I look forward to seeing how they spin the dismal July sales numbers due out soon.
Western States See Mixed Foreclosure Numbers for July
ForeclosureRadar’s Foreclosure Report for July 2012 showed mixed month-over-month trends from state to state but revealed an overall year-over-year decline in foreclosure filings.
The report, released Monday, covers Arizona, California, Nevada, Oregon, and Washington. Of the five states, only Arizona and Oregon posted decreases in foreclosure filings from June, while California and Nevada reported relatively small increases.
Washington showed the largest increase in filings, posting a 22.4 percent rise from June.
Oregon reported a 64.2 percent decrease in foreclosure filings, likely due to trends in the state that may indicate a lean toward a judicial foreclosure process. The state saw a new law (SB 1552) that gives homeowners at risk of default the right to request foreclosure mediation. In addition, a ruling from the Oregon Court of Appeals forced some lenders to proceed judicially with foreclosures, contributing to a drop in filings.
At this time, it’s not clear if this is just a temporary decline or a shift toward a judicial foreclosure process in the state.
Foreclosure sales were also mixed across the states. Washington reported the largest decrease in sales, posting a 27.5 percent drop from June. Nevada’s sales also fell 4.6 percent.
Of the other states, Arizona saw the largest increase in foreclosure sales with 27.5 percent. Sales increased slightly in California (10.5 percent) and stayed fairly flat in Oregon (0.4 percent).
Time to foreclose either fell or stayed flat in all five states, with California reporting the largest decrease (10.4 percent) and Washington reporting the largest increase (only 2.0 percent).
While these numbers were too varied to be indicative of a larger trend within the region, ForeclosureRadar founder and CEO Sean O’Toole said long-term trends-which show decreases in foreclosure activity in every state except Washington-are more important.
“While we are as curious as anyone to see the direction foreclosures are headed each month, it is important to keep things in context,” O’Toole said. “It is not unusual to see the number of Foreclosure Filings or Foreclosure Sales go up or down 10 percent or more each month. Whether it’s due to the length of the month, holidays, or internal delays at a lender, trustee, or posting company, it is completely normal to see fluctuations. What’s important is the bigger picture.”
Another day of ‘red’ across the board in MBS land……
http://www.mortgagenewsdaily.com/mbs/?Product=FNMA30
Just wow. Its hard to type a lot and when Internet flicks on and off.
Will Speculators Rescue The Housing Market?
After the housing bubble burst there was sympathy for first-time home-buyers who had been enticed in by the easy loans and rising home prices and wound up in trouble.
But investors in single-family homes came to be castigated as ‘flippers’, ‘suckers’, and worse. They had played a significant role in creating the bubble, signing contracts, often on multiple homes, making virtually no down payments, not intending to ever live in or even rent out the homes, but to simply flip them for a quick profit. Builders could hardly keep up with demand for a while, but wound up with wastelands of partially completed developments and condo projects, especially in the sun-belt states.
That ‘investor’ activity resulted in much of the subsequent pile-up of defaulted mortgages, foreclosed properties, and record high inventory of unsold homes that has had the housing industry in a five-year depression.
But for the past year, real estate speculators and investors have been playing a perhaps heroic role by diving back in on expectation that the real estate market is bottoming.
They themselves may even be creating the may even be single-handedly creating the conditions themselves that have them optimistic.
In my earliest posts back at the IHB, I stated the bottom would be formed by investors stepping in to buy cashflow. It took five years for prices to get low enough, but it’s finally happening.
Last month foreclosures dropped by 10%. This month foreclosures jumped by 10%, putting us back at May levels, and you declare that “More supply is coming.”
Even more laughably, Orange County had 7 more foreclosures than the previous month, but you say rest assured more supply is coming.
Foreclosures in OC peaked exactly 4 years ago, in August 2008, and have been declining ever since. It’s time to embrace reality folks. More supply is not coming.
Mellow Ruse says:
August 15, 2012 at 10:09 am More supply is not coming.
————————————————————–
Ribsplitterdeluxe. That one is gonna cost ya big-time.
“Foreclosures in OC peaked exactly 4 years ago, in August 2008, and have been declining ever since. It’s time to embrace reality folks.”
The peak in foreclosures did not correspond to a peak in delinquencies. Foreclosures stopped because lenders decided to allow 40,000 delinquent mortgage holders to squat in their homes.
“More supply is not coming.”
So banks are going to give away 40,000 homes in Orange County to people who quit paying their mortgages years ago? Do you think lenders will cure 40,000 delinquent mortgages in OC?
I don’t think that’s reality.
“So banks are going to give away 40,000 homes in Orange County to people who quit paying their mortgages years ago? Do you think lenders will cure 40,000 delinquent mortgages in OC?”
Yes, “more” supply is coming, but not all at once. Instead, its likely to be the same drip-drip-drip trend of the last 5 years. So yes there will indeed be 40K more eventually.
But “More supply is coming” in a way that you and I and other sitters can wait and capitalize on its presence…. Not so much
Yes. They will meter it out slowly over time. So far, they have been surprisingly successful at managing the inventory of a cartel.
So I take it, even you agree “more supply is not coming”.
Sorry for the delayed response. I was having internet connection issues yesterday.
For the state of California, which your post focuses on, there was a recently passed piece of legislation called the Homeowners Bill of Rights. It empowers borrowers to stall the process in numerous ways, most of which I believe you covered.
What I think was missed is that starting January 1st, California effectively becomes a JUDICIAL foreclosure state. This is because it becomes a felony to make ANY mistakes when completing a foreclosure outside of the court system. A similar law was recently passed in Nevada and I believe you witnessed firsthand the chilling effect on foreclosures there. That is the future for California and no amount of backlogged inventory is going to lead to the proverbial tsunami that the bears have been waiting for. That dream is dead.
Expect foreclosure timelines to at minimum double. Short sales will be the disposition route of choice from now on, but as you’ve pointed out, that requires borrower cooperation. The committed squatters will find a way to game that system too and the new “Bill of Rights” only empowers them to do so even more.
You often times paint bankers as a cartel, but it’s really the government that not only encourages this behavior, they mandate it. Nobody wants to go to jail because some $12/hour kid forgot to cross a ‘T’ or dot an ‘I’ on routine foreclosure paperwork.
I don’t think the foreclosure law here is quite as onerous as the Nevada law. It will cause some changes, but it won’t bring on the Nevada paralysis. In fact, Nevada is probably going to relax its law because so many are squatting there.
I agree we will not see a tsunami of REO. The banks have proven adept at managing their dispositions over the last four years, and they will likely continue more of the same over the next four.
I don’t think it’s going to lead to complete paralysis, but it’s one more roadblock that will extend the timelines. A flood of inventory just isn’t possible in the current regulatory environment, unless it’s from equity sellers . The housing market will recover despite the distressed backlog because it will become a smaller and smaller percentage of available inventory.
Mellow Ruse:
“More supply is not coming.”
Does that mean that sites such as:
http://www.foreclosureradar.com/
http://www.foreclosure.com/
http://www.foreclosures.com/
http://www.foreclosurelistings.com/
are scams?
and publishing made up fictitious data?
Word that best describes the rate of selling so far this week in MBS land: onslaught.
Same with govies, with the 10yr yld 1.7309 ‘ceiling’ taken-out handily today, now @1.81
Expect OC transaction volume to tank in the coming days/weeks.
Just curious …
Those of you who think there is nothing immoral with strategic defaulting:
Do you think anyone has to pay for the payments not being made?
And if so, who do you think has to pay?
No point even raising the issue.
1) morality is subjective
2) no reference to morality in any mort contract verbiage
just say’n
Morality is subjective unless you’re the guy getting screwed.
“Do you think anyone has to pay for the payments not being made?”
No. If banks do not receive this income, then equity investors don’t make profits, and if the defaults are widespread enough, then bondholders might lose money. Both of those investors put money into the bank because they believed management would make good loans and as an investor they would be compensated for the risk. If management did a poor job of underwriting loans, the investors should expect to lose money. Therefore the only people “paying” when payments are not made are investors who knew the risks they were taking on when they invested.
That seems al little facile. Realistically, the bank is not going to screw bondholders or investors THAT much, because if they do no one will ever invest in the bank again — which means the bank dies.
A much more realistic scenario is that they clip the investors a little bit, and take the rest out of their customers, e.g. depositors and borrowers, by raising the cost of their services (or reducing the value they pay to depositors — and what the going rate on a CD, I ask you?) So, in fact, a whole bunch of customers who had no part in the investing decision are going to get hit, too.
Now, in the ideal world, when the bank attempts to recover too much of its losses by cranking up its prices, banks that did not make dumb investment decisions won’t have to, will undercut the losers, and the losers will go out of business, killed by the double whammy of losing the investors’ money and being unable to heal the investors by screwing the customers.
But remember “too big too fail?” TARP? In our collective wisdom, as expressed in the 2008 election, we’ve foreclosed that option. We’re not going to let BofA go out of business, so we have chosen as a nation to heal the investors at the expense of depositors and taxpayers.
Good job, Congress! Are we sure these people aren’t moles from Communist China designed to destroy the US economy? Would they act any differently if they were?
Some investors may lose a bit, but mostly it will be you, the taxpayer. You will pay for others not paying.
If I am right and it is you, the taxpayers who will pay, instead of investors who knew the risk, is strategic defaulting then immoral? After all, the little guy will pay the most and he certainly did not “know” the risk.
Do we find our conclusions and our reality to fit our comfort and our preconceptions or do we look at the facts?
Those who can least afford it will pay. If you can not see how that is already happening, my guess is that you will never see it, no matter how evident.