Orange County housing market rising due to restricted inventory

 COTO DE CAZA, NEWS
Nov 062012
 
Orange County housing market rising due to restricted inventory

In late 2011, the valuation metrics in the OC Housing News Report became very bullish. Due to low interest rates and slowly deflating prices, the cost of home ownership relative to rent fell far below historic norms. In other words, it was much cheaper to own than is usually is. Despite the falling prices, the valuations were attractive, and this report began issuing strong buy signals. Those that trusted that advice bought at what appears to be the bottom of the market. Only time will tell if the spring 2012 bottom is durable. In spring 2012, lenders dramatically slowed their [Read More...]

Below-median home inventories may not recover for years

 BREA, NEWS
Oct 182012
 
Below-median home inventories may not recover for years

For home inventories to recover, sellers must come back to the market. Since so many loanowners are underwater, particularly at lower price points, very few organic sales occur on below-median properties. Further, since below-median loanowners have a strong incentive to squat until foreclosure, few of these properties are coming to market as short sales. That leaves us with a depleted market that is only be replenished by foreclosures. And as I noted on Monday’s post MLS inventory is NOT coming as foreclosure filings dry up, banks are in no hurry to process foreclosures and bring these properties to the MLS. [Read More...]

Liquidating shadow inventory requires managing absorption rates

 FULLERTON, NEWS
Aug 292012
 
Liquidating shadow inventory requires managing absorption rates

The arguments about whether there is or is not a shadow inventory have gotten silly. There is a shadow inventory, and there are certain facts we can establish about it. First, there are millions of delinquent mortgage squatters who will not be given free homes. The exact number is impossible to ascertain because no accurate records are kept outside the banks who aren’t accurately sharing this information. Since the banks aren’t disseminating accurate information (why would they?), CoreLogic, who relies on voluntary information, consistently under reports the problem. Second, the disposition of these properties will require a sale on the [Read More...]

Future house prices, “It’s up to the banks, stupid.”

 ANAHEIM, NEWS
Aug 162012
 
Future house prices, "It's up to the banks, stupid."

Economists and housing market observers pour over sales numbers each month to divine the direction of future house prices. Everyone has their pet theories on whether house prices have bottomed or if there is more pain ahead. Many rely on these numbers as gospel forgetting that these numbers are generated by the actions of people responding to the conditions around them. Change the conditions, and the numbers can change quickly. CA – Foreclosure Outcomes For example, in February of 2012, lenders across the Southwest abruptly stopped processing their backlog of foreclosures, not because they exhausted the supply of delinquencies but [Read More...]

Mortgage delinquencies rising as lenders slow foreclosure processing

 NEWS, ORANGE
Aug 142012
 
Mortgage delinquencies rising as lenders slow foreclosure processing

Foreclosure rates are declining across the Southwest. Lenders are slowing foreclosures because they want house prices to bottom and start going up due to a lack of distressed supply on the MLS. This would be a natural occurrence once shadow inventory is eliminated, but right now, this slowing of foreclosures is a contrived policy of a cartel desperately hoping they can force prices to move higher. If foreclosures were declining because lenders were out of delinquent mortgages to foreclose on, we would all be celebrating the housing market recovery. However, lenders are not out of delinquent mortgage squatters to boot [Read More...]

Do the benefits of shadow inventory outweigh the costs?

 NEWS, YORBA LINDA
Jul 302012
 
Do the benefits of shadow inventory outweigh the costs?

Shadow inventory is composed of delinquent mortgage holders who still occupy the houses they are not paying for. Many in shadow inventory have been living payment free for years, and many will continue living for free for several more. So why did banks do this? Ordinarily, banks would foreclose quickly to get their capital back to loan it profitably to someone else. What was their benefit in allowing so many to squat for so long? In mid 2008, house prices were crashing hard, particularly in subprime dominated markets which were the first to implode when their toxic mortgages required higher [Read More...]

Bank of America has one million customers who missed at least two payments

 FULLERTON, NEWS
Jul 182012
 
Bank of America has one million customers who missed at least two payments

CA – Foreclosure Outcomes Banks are slowing foreclosure rates yet again, and it isn’t because they are out of borrowers to foreclose on. With the settlement earlier this year, banks began to clear out their existing REO inventory, and they slowed foreclosures in the Southwest in order to modify mortgages to meet their requirements under the settlement (note the uptick in cancellations last month). Ideally, the banks would like to modify loans to keep borrowers in place and complete short sales for those who want to leave. They don’t want to resolve there legacy toxic loans by foreclosure. Unfortunately, borrowers [Read More...]

OC Shadow inventory: What it really is and how large it really is

 BUENA PARK, NEWS
Jul 172012
 
OC Shadow inventory: What it really is and how large it really is

There is no commonly accepted definition of shadow inventory. This creates a great deal of confusion, and as a result, many casual observers dismiss it as an unreal bogeyman. It’s out of sight, so it’s out of mind. CoreLogic has the most widely accepted definition of shadow inventory, but it’s wrong, and their numbers under report the actual figures. CoreLogic, counts visible bank-owned inventory and borrowers who have been served notice. These properties are visible, and although they may not be on the MLS yet, they are not hiding in the shadows. The real shadow inventory is the total number [Read More...]

Perpetual shadow inventory extends housing downturn and creates uncertainty

 NEWS, RANCHO SANTA MARGARITA
Jun 212012
 
Perpetual shadow inventory extends housing downturn and creates uncertainty

The reports of declining shadow inventory are wrong. Since lenders slowed their processing of REO inventory, shadow inventory stopped getting any smaller. As CoreLogic noted in their recent report, “the flow of new seriously delinquent (90 days or more) loans into the shadow inventory has been approximately offset by the equal volume of distressed (short and real estate owned) sales.” In other words, lenders are only treading water, and shadow inventory will be around indefinitely. Shadow inventory liquidation will prevent any meaningful and sustained house price appreciation. Either through short sale or REO, these properties must be sold, and potential [Read More...]

When MLS inventory is tight, good deals are hard to find

 NEWS, SANTA ANA
Jun 182012
 
When MLS inventory is tight, good deals are hard to find

Banks are slowing their acquisition of foreclosures to reduce their standing inventory of REO. They are also slowing the rate at which they are selling on the MLS and putting fewer and fewer homes for sale. Delinquent mortgage squatters are not taking up the slack and listing their homes as short sales, primarily because they get a free ride if they simply wait and do nothing until the bank finally forecloses. With both banks and loan owners choosing not to list their homes, the inventory available for sale on the MLS has fallen substantially. Until the incentives change, neither banks [Read More...]

Planning to buy a home this spring? Why not wait?

 MISSION VIEJO, NEWS
Jun 112012
 
Planning to buy a home this spring? Why not wait?

Several months ago, I had a meeting with a representative of the OC Register who wanted to sell me ad space. During the conversation, he said the realtor community in conjunction with the OC Register needed to create a “buying frenzy” to help liquidate the abundance of distressed inventory. Obviously, he was not a reader of the blog. Perhaps in the era before blogs, a coordinated mis-information program conducted by realtors and the local media would succeed in persuading buyers to act when it is not in their best interest to do so. We have certainly seen consistent examples of [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...]

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...]

Sales down, prices down, shadow inventory abundant, and Shiller says prices may never recover

 FOUNTAIN VALLEY, NEWS
Mar 282012
 
Sales down, prices down, shadow inventory abundant, and Shiller says prices may never recover

The frenzy over the possibility of a bottom in the housing market needs to be tempered by the reality of the current market situation. Despite relative affordability, sales volumes are low and declining, resale prices are still falling, we have a huge overhang of supply in shadow inventory, and as economist Robert Shiller points out, we may be on the Japanese path of decade-long deflation in housing. Any one of these conditions would warrant market pessimism. All at the same time calls into question the viability of any market bottom. OCHN Presentations, Wednesday, March 28, 2012, 6:30 and 8:00 I [Read More...]

Loan owners are $3.7 trillion underwater

 LAGUNA BEACH, NEWS
Mar 272012
 
Loan owners are $3.7 trillion underwater

The depth of American’s underwater mortgage debts is truly staggering. $3,700,000,000,000 That’s not the amount of debt outstanding, that is the amount Americans are underwater. Principal reductions are not going to make America whole again. Nobody, not even the US government can afford to write down amounts that large. The biggest principal reduction programs proposed so far are less than $100 billion. That is less than 1/37th of the problem. In short, principal forgiveness is not going to solve the problem. Lenders would like to see the problem remedied by having prices go back up. As someone accumulating properties in [Read More...]

B of A’s foreclosure push is hitting the MLS

 NEWS, RANCHO SANTA MARGARITA
Mar 192012
 
B of A's foreclosure push is hitting the MLS

Last fall I documented Desperate for cash: BofA cuts 30,000 jobs, ramps up foreclosures and Bank of America foreclosure notices increase 116%, spring 2012 rally doomed. It’s spring now, and although current bank inventory on the MLS is low, the pipeline of foreclosures is still quite large, and now properties B of A began foreclosing on last fall are already coming to market (see today’s featured property). It has begun. Home repossessions set to jump in 2012 By Jon Prior Analysts expect between 900,000 and 1 million homes will move from delinquency into REO in 2012, back to levels seen [Read More...]

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