Banks in November scheduled more than 26,000 homes to be sold at California foreclosure auctions, a 63% increase from October and a sign that a surge in discounted, bank-owned properties is on track to hit the market next year.
In September I noted, Bank of America foreclosure notices increase 116%, spring 2012 rally doomed.
The uptick in scheduled auctions follows an increase last summer in homes entering the foreclosure process by receiving default notices and was largely driven by Bank of America. It appears that many of those homes are now quickly working their way through the process, said Daren Blomquist, a spokesman for RealtyTrac of Irvine, a data tracker that published the November data.
B of A is desperate. They may be too big to fail, but they aren’t too big to keep hemorrhaging cash forever. Desperate for cash: BofA cuts 30,000 jobs, ramps up foreclosures
The increase played out nationally, hitting a nine-month high, even as overall foreclosure notices declined last month. Among the states, California had the biggest month-over-month increase in scheduled auctions, followed by Washington, 56%; Ohio, 53%; New Jersey, 44%; and New York, 38%.
“November’s numbers suggest a new set of incoming foreclosure waves, many of which may roll into the market as [foreclosures] or short sales sometime early next year,” said James Saccacio, co-founder and chief executive of RealtyTrac.
B of A is getting the timing right. If they want to sell these REOs without completely crashing the market, they need them ready for the spring selling season. Expect to see most of these homes hit the market between March and July.
Nationally, overall foreclosure filings on U.S. properties— default notices, scheduled auctions and bank repossessions — totaled 224,394 in November, down 3% from October and off 14% from November 2010. About 1 in 579 homes received a foreclosure filing last month, by RealtyTrac’s tally.
Celia Chen, a housing economist with Moody’s Analytics, said she expected the number of foreclosures on banks’ books to rise next year and for the number of discounted foreclosures on the market to remain elevated. That will continue to put pressure on home prices.
“The pace of sales will remain very slow, so the share of distressed sales is going to rise most likely through the middle of next year, and this will cause home prices to fall,” Chen said. “Job growth is still weak, and then it is still a bit difficult to get those low rates. Lenders, in general, are still being pretty careful about who they write a mortgage for.”
Yes, banks now move beyond a pulse test, and they actually require a job and verifiable income. Banks will remain what realtors and others consider “tight” indefinitely because they are merely practicing good underwriting techniques — at least for now.
The West’s Foreclosure Belt continued to be the hardest hit region in the nation. Nevada posted the highest foreclosure rate in the nation for the 59th month in a row, despite a decline in foreclosure activity because of a new law cracking down on those doing the foreclosing. California had the second-highest rate and Arizona the third in November.
The new law in Nevada is having an impact on the issuance of new NODs. Nevada may not post the highest foreclosure rate in the nation in a month or two, but any such reduction is temporary.
California cities accounted for nine of the 10 metro areas with the highest foreclosure rates. Las Vegas was the only city outside of California in the top 10, coming in at No. 6. Stockton posted the nation’s highest foreclosure rate for the second month in a row, followed by Modesto and Fresno.
In California, total foreclosure activity was up 15% from October and up 11% from November 2010. The number of homes entering foreclosure continued at an elevated level last month, down just 1% from October and up 12% from November 2010. Notices of trustee sales, or scheduled auctions, jumped 63% month over month and 14% over November 2010. Bank repossessions declined 15% from the previous month and were up 1% from the same month last year.
The uptick in California filings was driven by the auction notices. When such a notice is filed at a county recorder’s office, a home can be sold within 21 days.
The foreclosures of thousands of squatters and the liquidation of REO in California will be proceeding in earnest next year. If their past behavior is any indication, lenders will stop selling so many REO if prices start to accelerate the pace of the declines. However, if BofA is as desperate as they appear to be, they may not care what impact they have on the housing market — they need the capital to survive. This may be the end of the banking cartel.
Freddie Mac: 30-year mortgage rate ties record low
December 15, 2011 | 7:58 am
The average interest rate on a 30-year fixed-rate mortgage dropped again this week to 3.94%, tying a record low set in October, according to housing finance giant Freddie Mac.
Freddie Mac’s weekly survey pegged the rate for a 15-year fixed-rate mortgage at a record low of 3.21%. Loans fixed for five years before becoming adjustable also set a new record, with an average start rate of 2.86%
The survey, released each Thursday, asks lenders to report rates they are offering to well-qualified borrowers who pay about 0.75 of a percentage point in upfront lender fees and discount points. The rates are for loans of up to $417,000.
Freddie has conducted the survey of 30-year loans since 1971, 15-year loans since 1991, and five-year adjustable hybrids since 2005.
The record lows have touched off the latest surge in home refinancing. But while sales of homes increased slightly in California last month, scheduled foreclosure sales have risen sharply and the environment for housing remains rough overall, as Freddie Mac’s chief economist, Frank Nothaft, pointed out in announcing the latest survey results.
“In its Dec. 13 monetary policy announcement, the Federal Reserve reiterated the housing market remains depressed,” Nothaft wrote. “Over the first nine months of 2012, households lost almost $400 billion in property values, which contributed to a $1.4 trillion reduction in overall net worth.
“In addition, serious delinquency rates (90 or more days delinquent plus foreclosures) on mortgages increased slightly between June 30 and Sept. 30 of the year, breaking a six-quarter consecutive decline, according to the Mortgage Bankers Association.”
Interesting argument in favor of Keynesian economics and more government spending to stimulate the economy.
Well, It Sure Seems Like Keynes Was Right
Henry Blodget | Dec. 17, 2011, 10:20 AM
After the experience of the past five years, it certainly seems like John Maynard Keynes was right, doesn’t it?
It seems hard to conclude anything else.
I’m not an economist, and I’m not born of a particular economic school that I’ve bet my life’s work on, so I have observed the global economic events of the past five years with a fairly open mind.
I’ve listened to Keynesians like Paul Krugman argue that the way to fix the mess is to open the government spending spigot and invest like crazy.
And I’ve listened to Austerians like Niall Ferguson argue that the way to fix the mess is to cut spending radically, balance government budgets, and unleash the private sector.
And I’ve also looked back at history–namely, Reinhart and Rogoff’s analysis of prior financial crises, the Great Depression, Japan, Germany after Weimar, and so forth.
And I have to say, the conclusion I keep coming back to is that Keynes was right.
In the aftermath of a massive debt binge like the one we went on from 1980-2007, when the private sector collapses and then retreats to lick its wounds and deleverage, the best way to help the economy work its way out of its hole is for the government to spend like crazy.
Or, rather, if not the “best way,” at least the least-worst way.
Because, obviously, piling up even bigger mountains of debt is not a happy side-effect of such spending.
But let’s face it: Austerity doesn’t work.
[there is much more]
Curious about the property below in Laguna Niguel. It looks like the property has been listed/delisted continuously for over 7 years, and the current price is listed as a shortsale below the year 2000 pricepoint.
Property History for 27782 MANOR HILL Rd
Date Event Price Appreciation Source
Dec 16, 2011 Pending — — Inactive CRMLS #11
Dec 15, 2011 Price Changed $550,000 — Inactive CRMLS #11
Dec 13, 2011 Listed (Active) $555,000 — Inactive CRMLS #11
Oct 21, 2011 – Price Changed * — Inactive CRMLS #10
Apr 21, 2011 – Delisted (Cancelled) — — Inactive CRMLS #10
Mar 09, 2011 – Pending — — Inactive CRMLS #10
Dec 01, 2010 – Listed (Active) * — Inactive CRMLS #10
Nov 28, 2010 – Delisted (Leased) — — Inactive CRMLS #9
Nov 28, 2010 – Price Changed * — Inactive CRMLS #9
Oct 29, 2010 – Relisted (Active) — — Inactive CRMLS #9
Oct 23, 2010 – Pending (Backup Offers Accepted) — — Inactive CRMLS #9
Sep 28, 2010 – Price Changed * — Inactive CRMLS #9
Aug 06, 2010 – Listed (Active) * — Inactive CRMLS #9
May 11, 2010 – Price Changed * — Inactive CRMLS #8
Apr 19, 2010 – Delisted (Hold) — — Inactive CRMLS #8
Apr 01, 2010 – Price Changed * — Inactive CRMLS #8
Apr 01, 2010 – Relisted (Active) — — Inactive CRMLS #8
Mar 30, 2010 – Delisted (Hold) — — Inactive CRMLS #8
Mar 29, 2010 – Listed (Active) * — Inactive CRMLS #8
Dec 01, 2007 – Delisted — — Inactive CRMLS #7
Jun 14, 2007 – Listed * — Inactive CRMLS #7
Feb 25, 2007 – Delisted — — Inactive CRMLS #6
Dec 01, 2006 – Listed * — Inactive CRMLS #6
Nov 20, 2006 – Delisted — — Inactive CRMLS #5
Jul 10, 2006 – Listed * — Inactive CRMLS #5
Dec 09, 2005 – Delisted — — Inactive CRMLS #4
Sep 02, 2005 – Delisted — — Inactive CRMLS #3
Sep 02, 2005 – Listed * — Inactive CRMLS #4
Jun 09, 2005 – Listed * — Inactive CRMLS #3
Dec 08, 2004 – Delisted — — Inactive CRMLS #2
Aug 31, 2004 – Listed * — Inactive CRMLS #2
Aug 24, 2004 – Delisted — — Inactive CRMLS #1
Aug 17, 2004 – Listed * — Inactive CRMLS #1
Jun 29, 2000 Sold (Public Records) $587,500 — Public Records
That’s a great find. It is listed as pending as a 2000 rollback. I will have to profile that one.
There isn’t much more information in the MLS. It is a short sale, and it doesn’t say what the pending price is.
IR,
I wanted to make an offer on that unit last week. There is mold and other construction issues. I was hoping everyone would get caught up with the holidays and I could close on something before anyone notices. 2000 prices at 2011 rates. Not bad. I was trying to do a deal while everyone got too busy with eggnog, turkey and mistletoe.
To keep myself safe, I would like to buy these homes at 1997-1999 prices to get an equity buffer should we get a major Japanization of the US economy. Laguna Niguel is a decent deal though….but next time you see one, let me close on the unit first!
Do you still have an offer pending?
What issues does the property have?
There must be a story to this one, otherwise the 2000 sales price is too low compared to where the rest of the market is at.
IR,
I never made a formal offer after the mold issue. I am not sure if there are some additional issues with the property. You can always back out the improvement cost to the median price in the area, but why buy at median price now when you will get it cheaper after the PPT (“Plunge Protection Team”) aka government gets out of the market or eases up on their central planning philosophies.
I am 50/50 on your government stimulus is better than austerity idea. Government is terribly inefficient and would rather see that money go back to Main Street instead of strip club money for Blankfein, Moynihan and Dimon.
I think we need both austerity in various agencies and stimulus in others. I say a combination….infrastructure stimulus (job creating) on several things and austerity on other agencies like the EPA, Dept or Education, Energy and Defense. The problem with stimulus is that for every dollar you put in, you only get a fraction of that back in benefits because governments are not efficient and people in general always act to benefit themselves (greed).
Who knows what will happend. Should just break out my pimp suit and get 80% commission. Even NAR can’t beat that!
If there’s mold, then I’d expect you must do a cash offer since residential mortgages are for habitable properties, and the appraiser would report the mold.
Is there any information (even if its anecdotal) or any thoughts on how representative Orange County in general and Irvine area in particular is with respect to these stepped up foreclosures by the banks?
In other words, would you anticipate that Orange County will see a flood of these foreclosures or is this mostly going to hit areas like Central California, Inland Empire, etc.
Much of shadow inventory is concentrated at high-end neighborhoods because lenders have been slow to foreclose. Further since these neighborhoods have seen the least price correction to date, I would anticipate places like Irvine to be impacted the most from an uptick in foreclosures. The silver lining to this increased activity will be neighborhoods like Irvine will recover quicker because there are going to be fewer foreclosures overall relative to the size of the housing stock, and places like Irvine are more desirable which will prompt more buying once prices come down.
If lenders start pushing through these foreclosures locally and prices go down further (which they will), it will be a good buying opportunity on the other side of the market cleansing.
IR- congrats on the new blog and as always, I’m looking forward to your insight and analysis of our ever interesting housing market.
This is slightly off-topic but I think it applies … given the fact that a great deal of shadow inventory is going to enter the marketplace as REOs in the next 12-18 months … why would builders be risking new developments? Just around the corner from me, KB homes is speculating on Whisler Ridge. They’re offering homes at WTF prices of $282/sq.ft … starting @ $655K. That is easily close to peak level pricing and I just cannot understand how a company that should’ve learned it’s lesson by now is back out there trying to sell new construction into a shaky market where those prices aren’t likely to hold? Talk about doing your customers a disservice … unless I’m missing something, aren’t these likely to become strategic defaults as the knife-catchers go underwater? What am I missing here?
Some of what you’re seeing is builders taking a chance that the market has bottomed. I think they are being foolish, but after nearly 5 years with new home construction barely at replacement levels, they are betting on a recovery. Most people in homebuilding don’t understand shadow inventory, and they don’t understand that they can’t build for a move-up market when there are no move-ups. When I worked at KB Home in 2005-2006, they had a market research department. It was eliminated when they cut back everyone else. What you have are a few key decision makers who really have nothing but intuition to go on. They are making a mistake, but they won’t fully understand why until after they fail. You need to look no farther than the Irvine Company’s efforts to see that simple truth.
Thanks. I guess I understand a builder’s desire to get things rolling again, after all if they’re not building homes they haven’t got a business anymore. I’ve got to agree with your comments, to my mind, they’re acting on equal parts intuition, delusion and wishful thinking. The sad part is, I suspect they’ll sell many of these homes … I’m not sure to whom … but sadly I also suspect those buyers will join the growing ranks of knife-catchers just trying to realize their “American Dream”. Sad.
I propose a long-term experiment/analysis … I’d like to track these new developments started post housing crash to see how they perform over the next 2-5 years. For example, how many buyers wind-up in foreclosure? How many strategically default? This one would be a good candidate as would the recently completed and sold development on the other end of Osterman Road, Summit Crest – built by Van Daele Homes. Those sold in the mid-to-high-$600’s and completed just over a year ago. The results might be informative as it relates to the buying mentality and the power of delusional thinking.
I’ve been watching as the builders here on the Ranch have been lowering their prices all year to generate sales. Each time they do, the previous buyers all submerge beneath their debts. I wouldn’t be surprised to see some strategic default in these communities as well, particularly since most of those buyer are in at price points above rental parity.
there is definitely going to be a “step down” effect. prices will slide, appear to flatten out / stabilize, and repeat the process 3 or 4 more times until they really do manage to stabilize for the near future.
didn’t know 9 out of 10 highest foreclosure RATES (emphasis in caps) are here in CA, but if we attempt to rationalize it, then this makes sense.. the mania was much bigger here, so a lot more damage was done inflating prices. we also got started later than the rest of the country with the freefall, and not just that they’ve had much further to fall.