Monday, June 2, 2008

Foreclosure Update

Sacramento made today's WSJ again. This time, in a slightly positive way related to the brisk sales of bank owned homes we have been experiencing.

Out here along the 50 corridor (thank goodness Mr. BT doesn't have to take I-5 to work) in Folsom and El Dorado Hills, we seem to be several steps behind the rest of the market. Prices haven't dropped nearly as much, so these markets haven't seen the same increase in sales activity compared to the rest of the metro area. Its a mixed bag right now.

Inventory is actually down considerably from last year at this time, and pendings are at an all time high according to my screen scrape criteria.

However, market stress indicators are still climbing. Since I started tracking NODs and Foreclosure numbers on 3 months ago, foreclosures in Folsom have doubled (up 100%), and they are up 144% in El Dorado Hills. NODs are up 71% and 11% respectively as well.

As far as the bank's willingness to wheel and deal, I believe its more case by case right now. While on vacation down South, a nice looking bank owned home came on the market in EDH. By the time we were ready to go do a drive-by, it was already pending (773 Lakecrest, MLS 80052575). This is in stark contrast the the agonizing negotiations we have been going through on the REO we are attempting to purchase.


Jacob said...

I read on one of these blogs (forget which) that new delinquencies are outpacing accounts being brought current like 2:1. Banks may finally be realizing just how many homes they will have to sell. And 50% off now is better than 75% off down the load.

Or 100% off when nobody will buy it at all.

Curious said...

Have year ago I had one co-worker losing a house (ostensibly due to a divorce. Reality: due to HELOC'ing for toys. Four year homeowners who got in right before the rise in prices and bought, in order; a bigger boat, a truck to tow the bigger boat, quads (off road motorcycles), and a brand new SUV for mommy (in a family of three, cuz they were planning on expanding the fam). The house is gone to pre-foreclosure short sale at $180K loss to the bank, but not to worry, this fractured family STILL has all the "paid for" toys. The funny (not) thing is, that the house sold as a short sale for slightly more than their original loan on the house. How tragic is that?

Sorry for sounding bitter, but this was a family and a situation that I originally thought "was different" and was spoken of in hushed tones.

Fast forward a year: talk of loan forgiveness, loan renegotiation, balance owed negotiations is all the talk of many of my co-workers...and it's not being done in hushed tones anymore, it's blatant.

I am shocked even though I knew many people stretched to get into houses, or to leap into their second upgraded home. These are not people straddling the median income in the Sacto. area. These are people who double, triple, or even quadruple the median income talking about either walking away or gleefully talking about their renegotiation tactics with their lenders. Openly.

I am no longer curious, I am appalled.

Give it time, there's another reset coming this month and into the rest of this year. From what I am hearing at work, if the lenders don't capitulate, there will be a boatload of higher end homes coming onto the market as REO's in the next six months.

Sold in '05 said...

I posted this over on Max's page but it goes well with this post also...

"Less inventory and more sales, is likely to slow down the pace of the price drops."

I disagree. More sales means that price drops will continue. Sales in my area are hopping and price drops appear to be accelerating.

It is all in the "comps". EVERY sale happening today makes the appraised value of tomorrow's sale ever lower. This is a downward price spiral and it is re-enforcing itself, just like it did on the way up.

Inventory doesn't matter right now. There are plenty of homes for sale and plenty more still being built. There is not now (and never was) a shortage of homes in the Sacramento area. Inventory is going down in the resale market in large part due to the inability of current homeowners to sell their homes for what they owe on them. No one wants to take a loss and most still hold out hope for the return of 2005 prices. The trouble is, some people have no choice and some others see the mistake they've made and are walking away. This leaves the market price to be set by these distressed sales. There are no other comparables to use.

What I am seeing in my search area (Roseville 95747) is an implosion in the price structure. Clean houses (and even some not so clean) have been selling fairly briskly since the beginning of the year. BUT the ones that are selling are in certain price ranges. $399k is smokin' hot with some feeding also going on at $499k. As summer has gone on the previously vacant $299k price point sells everything that is placed there. Everything above these price points is freefalling toward them. Looking at the $500-550k listings, they are now chalked full of homes that are in the 3500-4500 sq-ft range and overlooking golf courses. These homes were in the $750k range at the beginning of the year! The higher end places seem to be falling faster than anything else. Maybe the owners are better off financially and can better afford to take the loss, or maybe they are more ruthless in a business sense and know that when an asset is losing value, you need to dump it.

We considered buying earlier in the year, but have now decided to wait at least another year, by then we will be able to afford a much nicer place in an even better neighborhood.