Something to Chew On

As some of you may recall, for the past couple months, there has been very little NOD activity in the markets I track. The NOD count for Folsom, El Dorado Hills and Auburn, has basically been halved.

Prior to today, I attributed this drop-off to the new law that became effective in California, SB1137. But, best I can tell, that law only added 45 days to the process. Thus we would have expected a pick up in NOD activity around late-October, as lenders complied with the law that became effective Sept, 8, 2008.

But here is where my conspiracy minded brain starts to ruminate. It wasn't till this week, 75 days, after SB1137 went into effect, that I began to see a pick up in NOD activity. Hmm, perhaps these lenders were holding their breath, waiting for the government to relieve them of these troubled assets.

When Paulson announced that the TARP funds were no longer going to be used to purchase mortgage-assets, they went back to business as usual. This idea came to mind, primarily because I had heard rumors in the blogosphere that Countrywide was not foreclosing or sending NODs while it was in the process of being bought by BofA. No idea if any of this is true or even possible, but it does seem like a plausible explanation given the timing.

Coincidence or conspiracy......thoughts?
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So does anyone know what has happened to Housing Tracker? It was one of my favorite sites for historical context and housing statistics.

If you Insist

As many of you know, I am not real keen on the government deciding who wins and who loses in the marketplace. I prefer the government to create a business environment with a level and equitable playing field (through regulation and oversight).

If the government insists on getting involved, I normally prefer to rescue people (providing safety nets, like unemployment and retraining), and not corporations (i.e. the big 3 now begging for a handout).

There seems to be a growing chorus for the government to get to the "root" of the economic problem: the housing market. My earlier recommendations, are still highly relevant, but I have some additional observations, based on recent data.

Today on Calculated Risk, there was an excerpt stating over 50% of modifications are defaulting. This is a rather astonishing number, and makes me wonder if workouts are really worth pursuing. It suggests that workouts only prolong the housing correction, as many of us have suggested. (For the record, I do support workouts for people who bought their home using at least 10% of their own money, paid their own closing costs, and whose income situation has not changed materially.)

Today's WSJ discusses a new tactic, help the buyers, instead of the owners. Of course, given my situation, I am a rather biased in favor demand-side solutions. However I think it has some legitimate merits as well. Offering subsided interest rates to home buyers, basically neutralizes my gripe from last week (home buyers have to pay market rates for mortgages and market value for homes, while workouts "homeowners" receive below market interest and principle).

So if the government insists on meddling in the housing market (which they have already done to a large degree), leveling the playing field so that buyers and owners enjoy the same perks, seems like an entirely reasonable thing to do.

November Market Stress Update for 95762, 95630, 95602, 95603

You know you are a nerd, when you are pissed off about work, so you play with housing data to help get you mind off things.

Anyways, here is the latest market stress update for El Dorado Hills, Folsom, and now Auburn. I wanted to include the monthly sales too, but it was just too much data on one slide, so I have attached the sales data separately (that MCB had sent me earlier...thanks again!). Do take the time to compare the monthly sales numbers to the NOD & REO levels.....if I had more time I would have done some combinations, but unfortunately I am really short on time these days.

As you can see, NODs have been stopped in their tracks by the recent CA legislation. Few new NODs are being filed, while old ones are getting resolved or reverting to REO status (notice the steady rise in REOs).

Just noticed I didn't label the data legend very well. It is the sales price bin in thousands of dollars. The data was rounded for ease of aggregating, so the "300" bin, is actually comprised of homes that sold from $250,000 to $350,000.

Going Public

Not sure I should do this......but I suppose everyone in the RE industry does (with their pictures on their cards).

So if you happen to see me on the street or at an open house, please say "hi", and offer me a smoking deal on your home.

Speaking of homes, there is a foreclosure back on the market I am trying to talk Mr.BT into. Haven't seen the inside yet, but the stats (do-able on one salary) and pics look good.

Why Punish the Prudent?

Dear Lawmakers –

I have a couple questions I was hoping you could answer. Why is it that people, who put little to no money down on a home, are now eligible for 2.5% interest backed by the government, and principle reductions of 90% to market?

We would love to purchase a home using a 20% down payment, however all we can find are interest rates at 6% or higher, and market home prices? It seems to me that those of us who have excellent credit scores, and down-payments are actually being punished and asked to pay more when compared to others.

I honestly don’t mind the government helping out actual homeowners. However, I don’t consider someone a homeowner unless they put more than 10% down when purchasing their home.

So all this talk about keeping people in “their” homes, seems like rhetoric aimed at people’s heartstrings. How am I, a renter, any different than someone who moved into a home with little to no money down? For a renter, it’s called a deposit, but for these “homeowners” it’s called closing costs. Yet paying closing costs, now entitles them to lots of special government subsidies that I am not eligible for.

As I am sure you are aware, rewriting loans to keep people in “their” homes, will prolong the pain and keep home prices higher than they would otherwise be. If a loan is rewritten, the government /lender should be required to record the new principle balance with the county, so that us home buyers can at least benefit from the lower more affordable comp.

As evidenced in many parts of Sacramento, the housing market is not broke. People will buy homes once they become affordable (using responsible lending products). Right now homes under $250,000 in our area are receiving multiple bids.

Letting the market adjust back to affordable levels has many benefits. If people are spending less on housing, they will have more disposable income to fuel the economy. It also means people can buy homes closer to work, as opposed to distant suburbs. This had a dual benefit because it will cut emissions and energy demand, while allowing people to spend more time with their loved ones and less time commuting.

Best of luck saving the economy,

Your Average Buyer