MLS inventory is NOT coming as foreclosure filings dry up

 LAGUNA BEACH, NEWS
Oct 152012
 
MLS inventory is NOT coming as foreclosure filings dry up

Since the housing bust began in 2007, housing analysts focused on lender activity as the best indicator of future housing supply and the direction of future housing prices. The reasoning for this is simple: lenders control the housing market. Prior to the housing bust, the housing market was a collection of individual homeowners unrestrained by their mortgage obligations. Once prices began to fall, many would-be sellers submerged beneath their debts and required lender approval for a sale. The short sale was born. Many others defaulted on their loans, and lenders foreclosed on the delinquent borrowers until lenders became overwhelmed with [Read More...]

Why the housing crash is far from over

 GARDEN GROVE, NEWS
Oct 052012
 
Why the housing crash is far from over

I am no longer bearish. I have been an outspoken housing bear for over five years now, but based on recent developments, I have far fewer worries about another catastrophic decline in house prices. The recent changes are as follows: Federal reserve’s open-ended commitment to unlimited stimulus for as long as it takes no matter the consequences. Lending cartel’s improved control of inventory liquidation. Removal of most barriers for refinancing underwater loans to aid kicking the can to spread out liquidations. These new developments when combined with some older existing policies has finally created the conditions for a manufactured bottom [Read More...]

Banks increase foreclosures 30%, notices plummet, REO pipeline stabilizes

 DANA POINT, NEWS
Sep 132012
 
Banks increase foreclosures 30%, notices plummet, REO pipeline stabilizes

Bank behavior determines home prices. They control the supply, and they control the money that drives demand. Whenever the banks change their policies, it shows up in the foreclosure statistics, and these changes determine the future of home prices. In August, three important developments happened in the foreclosure market: Banks greatly increased their REO acquisitions. Banks sharply curtailed new filings of notices of default. Banks stopped their internal liquidations of REO standing inventory. Each of these developments has implications for future home prices. The Foreclosure Report – August 2012 “We continue to see reports that there will be a wave [Read More...]

Conventional wisdom wrong, foreclosures don’t reduce neighborhood values

 NEWPORT BEACH, NEWS
Aug 132012
 
Conventional wisdom wrong, foreclosures don't reduce neighborhood values

Conventional wisdom is that foreclosures reduce neighborhood values. It turns out, that isn’t the case. It’s easy to see why people come to this erroneous conclusion. Properties that go through foreclosure often sell for less than recent comparable sales, particularly after the peak of the housing bubble when values were grossly inflated and ripe for a serious correction. However, it wasn’t the foreclosure that caused the discount, it was a motivated seller dealing with a property in poor condition that ultimately caused prices to fall. You wouldn’t know it by the huge inventories they currently manage, but lenders are not [Read More...]

Banks cut standing REO inventories by reducing new acquisitions by 50%

 ALISO VIEJO, NEWS
Jun 142012
 
Banks cut standing REO inventories by reducing new acquisitions by 50%

Foreclosure Radar just released its report on May foreclosures. The change in bank’s behavior since the beginning of the year is becoming apparent. Lenders are determined to steadily reduce their standing REO inventory. At current liquidation rates, they will have cleared out the backlog of standing inventory by the middle of next year. Of course, this comes at a price. Lenders are not making headway on shadow inventory, and those who have been delinquent on their mortgages for a long time are going to get to squat even longer. Lenders are hoping these people will opt to short sell their [Read More...]

Banks cannot force a short sale

 FULLERTON, NEWS
May 312012
 
Banks cannot force a short sale

Banks cannot force a short sale. So what, you say? Well, this simple fact has eluded the banks and the pundits who believe banks can simply shift their liquidation efforts from REOs to short sales. The major banks in the settlement deal want to complete more short sales to reach their write-off quotas. Short sales count toward their settlement amount, and foreclosures do not. This explains much of the recent dramatic shift away from foreclosures. However, foreclosures are within the control of banks; they can force foreclosures. Short sales are not within the banks control. Sure, they can approve more [Read More...]

California realtors buy politicians to lobby against lost commissions from bulk sales

 DANA POINT, NEWS
May 252012
 
California realtors buy politicians to lobby against lost commissions from bulk sales

NAr couldn’t care less about the greater good. They lobby for their own narrow interests, irrespective of the impact it will have on the housing market, the rental market, or the broader US economy. Their latest self-serving battle is against bulk REO sales. Obviously, they don’t want to lose MLS commission sales to bulk transactions which generate no commissions to them. There is no other reason to oppose these bulk sales. Bill would stop bulk REO sales in California NAR backing sponsor Gary Miller’s reelection bid By Inman News, Friday, May 18, 2012. California Rep. Gary Miller — who’s getting [Read More...]

Short sales damage house prices just like REO

 NEWPORT BEACH, NEWS
May 242012
 
Short sales damage house prices just like REO

Many market pundits claim lenders should focus on short sales rather than foreclosures. They contend short sales offer better capital recovery than foreclosures and they are less harmful to market pricing. This is not an accurate assessment. First, not all foreclosures become REO. About a third of all foreclosures are purchased by third parties who either flip them or hold them as cashflow investments. Flippers generally improve the property and sell for full market value, so their activities don’t push prices lower. And obviously, cashflow investors don’t push prices lower because they don’t sell their properties. Both short sales and [Read More...]

California bank repossessions continue to plummet, squatters rejoice

 NEWS, SANTA ANA
May 232012
 
California bank repossessions continue to plummet, squatters rejoice

Like any business, banks adjust their business plans quarterly based on both internal and external forces. Internally, banks respond their need for additional capital to fund operations. Externally, they cope with a declining housing market, recent regulatory changes, and new conditions imposed by the bank settlement. When banks adjust their business plans, it may have sudden and dramatic effect on their policies. In the first quarter of 2012, the major banks which control most California REO dramatically reduced the number of properties they purchased at auction. The precipitous declines in REO were not due to improving borrower delinquency. Far too [Read More...]

8.7 years to clear Orange County distressed inventory at stable liquidation rate

 FULLERTON, NEWS
Apr 302012
 
8.7 years to clear Orange County distressed inventory at stable liquidation rate

Lenders are withholding inventory across the Southwestern United States in hopes of creating a shortage of supply to reverse the downward spiral in home prices. Lenders constantly try to balance two competing forces. First, lenders need to get their money back. Dead money tied up in non-performing assets does not contribute positively to their bottom line. Further, this money also cannot be used to fund ongoing operations. This puts enormous pressure on lenders to liquidate and put their capital toward a productive use. On the other hand, if they liquidate too quickly, house prices go down which reduces the amount [Read More...]

What happened to the REOs that were due this spring?

 GARDEN GROVE, NEWS
Apr 252012
 
What happened to the REOs that were due this spring?

Last fall B of A and other major banks increased their filings of Notices of Default. Since then I have been predicting a spring surge of REO that would snuff out the spring rally. Right on schedule in January, Notices of Trustee Sale and the number of REO acquired increased, and it looked like the REO would hit the market in time for the spring selling season. Then lenders changed their collective minds. In February, lenders abruptly curtailed their acquisition of REOs at the auctions, and in March they took back fewer than in February. CA – Foreclosure Outcomes This [Read More...]

How will lenders liquidate their upcoming foreclosures?

 LAGUNA NIGUEL, NEWS
Apr 172012
 
How will lenders liquidate their upcoming foreclosures?

This year lenders drastically reduced the number of REO they are getting at auction. The numbers are down 62% over this time last year. Further, they have reduced their MLS inventories by nearly 20% from last year’s levels. Apparently, lenders are going to continue to reduce MLS inventory until prices bottom to reverse the two-year slide. This unexpected change is a desperate move to stop the market’s downward spiral. It means we will likely see depleted MLS inventories through the spring selling season and into the fall. At that point, the new crop of REOs from today’s default notices will [Read More...]

Distressed sales cannot be excluded when analyzing the market

 MISSION VIEJO, NEWS
Apr 162012
 
Distressed sales cannot be excluded when analyzing the market

A common meme in the realtor community is that distressed sales, REO and short sales, are somehow not part of the market. It’s a common misconception shared by agents, sellers, and some misguided housing market analysts. This idea emanates from the desire to see prices rise. Every seller wants to get a premium price, and agents are prone to pander to seller delusions to get listings. When the market moves the other way, agents have to explain to sellers why they couldn’t get their WTF asking prices, and rather than admit they pandered to a seller’s delusions, agents will blame [Read More...]

The lending cartel believes they can hold back the REO flood

 NEWS, TUSTIN
Apr 022012
 
The lending cartel believes they can hold back the REO flood

In what can best be termed as delusional optimism, the lending cartel is cautiously optimistic they can control the flow of properties as the liquidate their shadow inventory. Based on what is happening today, lenders have reason to be optimistic. Collectively, they are withholding REO inventory and decreasing the supply of distressed inventory to force the market to bottom this spring. They don’t have much to lose. If they keep putting properties on the market, prices will certainly continue to fall. They hope that by removing the inventory, they can get the markets to bottom and with the constant barrage [Read More...]

Foreclosure settlement and bulk sales will dramatically increase foreclosure rates

 NEWS, RANCHO SANTA MARGARITA
Feb 142012
 
Foreclosure settlement and bulk sales will dramatically increase foreclosure rates

The newly announced foreclosure settlement deal should dramatically increase foreclosure rates because banks no longer have to worry about lawsuits over their foreclosure practices. Further, with impending sales of bulk portfolios to private equity groups, banks will be able to dispose of the REO once they acquire it at auction. With the two biggest impediments to foreclosure removed, banks have no reason to permit delinquent mortgage squatters to continue receiving free housing. Let the foreclosures begin. Foreclosure Deal to Spur New Wave of U.S. Home Seizures, Help Heal Market By Prashant Gopal and John Gittelsohn — Feb 9, 2012 9:01 [Read More...]

Lenders own $30 billion in California single-family homes

 NEWS, YORBA LINDA
Feb 092012
 
Lenders own $30 billion in California single-family homes

Over the last few years, I have decried efforts from crony capitalists to corner the single-family REO market by negotiating bulk sales directly from lenders or the GSEs. I still believe individual investors have a large role to play in cleaning up the mess, but after contemplating how large the problem really is, I am far less concerned that crony corporations could buy enough to impact the market. In California alone, each month lenders take back nearly $2 billion in single-family properties. They have a standing inventory of about $30 billion. They only obtain $2 billion a month because that’s [Read More...]

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