Updated Housing Market Stats for Folsom and El Dorado Hills

Wow, I didn't realize it had been so long since I last posted the historical charts. As usual, both sales count and price (average and median) are presented from two different sources. Note that the Melissa data includes new home sales, and cites the average, which is typically much higher than the median.

To help wade through all the monthly fluctuations, the 6 month moving average is now emphasized. The strong downward pricing trend over the last couple years has given way to a new period of relatively flat prices. I believe this new trend has momentum since sales are also up, or flat.

The forecasted flurry of foreclosures appears to be more of a steady trickle. The number of foreclosures and defaults, while elevated compared to historical standards, are both off their previous peaks for Folsom and El Dorado Hills.

Housing Market Stress Indicators Two Year Perspective

With this month's update of market stress indicators in our local area, I now have 2 years of historical data on NOD (notice of default) and REOs (real estate owned). These two metrics for El Dorado Hills and Folsom, while off their previous peaks, are still highly elevated compared to normal times.

It's safe to say that home prices in the area are no longer in free fall, but continued stress will keep a lid on any appreciation for a long time to come.

Speaking of market predictions, by now I had expected interest rates to be at least a full percentage higher. It was one of the factors (not a huge one, but certainly material) that led us to purchase when we did. But there has been a lot of talk on the blogs and in the MSM lately about interest rates, and how we have managed to keep a lid on inflation. Guess it's a good thing I still have my day job, cause predicting economic indicators doesn't seem to be my strong suit.

One Year Market Assessment

We bought a new home a year ago last week. As one who follows market trends, I was well aware of the continued downside potential in the Sacramento housing market, so our decision still causes me a bit of anxiety.

However according to the latest DQ stats, so far the damage isn't that bad. As of January 2010, the number of homes sold in El Dorado Hills is up (29%), median price is only down 3.4% and price per sqft is only down 1.3%. Stats for Folsom are fairly similar. Of course three numbers can masks a lot of undercurrents. But other stats are looking favorable as well......the number of NODs in the two zips continues to fall and foreclosures have held fairly steady despite the earlier surge in NODs.

At the same time, my own neighborhood, a new development, is slowly starting to crack. There are many short sales currently on the market and at least two foreclosures now. However Zillow only shows a drop in value of 3.4% (perhaps tied to the median price decline as opposed to comps?).

On a personal note, so far we have been absolutely delighted with our decision. We love the neighbors, we love the neighborhood, we love the house, and we especially love the drive into and out of our neighborhood. On a clear day you can see the snow capped Sierras on the way in, or the entire Sacramento Valley on the way out.

Our only disappointment has been that our builder, Pulte, did a super crappy job landscaping our front yard, and laying the drainage. I will report more on that in a later post.

Cresting Wave or Holiday Respite

Back in November, I suggested that the wave of NODs in the two zip codes I track may be cresting. A month and a half later, it sure does appear that way. However, I'm starting wonder if there could be something else is afoot.

Around this time last year we saw a significant drop off in fillings due to state legislation, coupled with a holiday reprieve by some of the government agencies (not sure if it only applied to foreclosure or if it applied to NOD filings as well). So I'm starting to wonder if the wave is actually cresting, or if it's just a temporary lull to avoid the potential bad PR of throwing a family into the streets during the holidays. It's hard to know for sure. I'm curious to hear other's thoughts.

In any case, I do think the number of foreclosures will slowly creep back up, as the NODs run their course. To be honest, I expected to see a lot more foreclosures by now. Fewer NODs are resulting in foreclosures (at least according to the data I track). Perhaps banks are more willing to negotiate short sales, perhaps there is shadow inventory, who knows.

Only a Sucker will Sacrifice

There are plenty of stories swirling about the blogs that make me feel like a sucker for having played by the traditional rules. The worst is the story that goes something like this.....a couple buys a home with no money down, extracts thousands of dollars in equity, which is then used to purchase exotic vacations and cars, then they stop paying their mortgage and bank the savings for a year while the bank slowly processes the foreclosure, or better yet get a permanent mod with a principle reduction.

The one I have actually experienced first hand, more than once, is related to short sales. The story goes like this, we walk into a nice home, with furnishing worth 8 to 10 times ours, the house is adorned out with all the latest electronics (massive flat screen TV, home theater stereo), toys galore (often high end car or boat in the garage), and of course the built in BBQ in the backyard, only to find out the house is a short sale. If they sold off even 1/5th of their possessions, they would have enough money to make the mortgage for the next year or so. Then Mr. BT and I leave feeling like we played the game all wrong.

So yes, I am bitter and venting a little, please bear with me (I just spoke with another friend who is now planning a short sale/walk).

I realize there are plenty of people who played this game and lost everything......but at the same time there are way too many who played it and hit the jackpot (heads I win, tails you lose). The way I see it, without skin in the game, it will be played over and over with the same result (the 3.5% FHA down payment loans are perpetuating this game).

November Market Stress Update for 95762 & 95630

It's probably too early to tell, but the wave of NODs appears to be cresting a bit. At this point, I expect REOs to start picking up steam, now that many of the NODs have run their 90 day course. I also expect NOD activity to be elevated for some time as the 3 & 5 yr (Option) ARM loans issued in 2005 - 2007 begin to readjust. Low interest rates won't protect these folks forever. Hopefully they are taking advantage of low interest rates and are refinancing into a fixed rate (if they are able).

I would really love to see an updated chart of when the different loans begin to adjust (taking into account refinancing etc).....like the chart here which seems super scary till you look here and see the perspective of what we have already been through (we are around month 35 if I read the chart correctly).....this one is the latest I have found and doesn't seem all that different from the original one (all links courtesy of Lander's Blog).

Not Much Hope for the High End

Last Spring I reported that I was aware of several folks in the local market to purchase a home. All were actively looking and making offers at what I consider the high end (500k and up).
At the time this gave me hope that the market was starting to spring to life.

My have things changed. In the end, two gave up and stopped looking to buy, and the third is not very hopeful about their current negotiations. I believe all three attempted short sales at some point and were incredibly frustrated by the process.

This is not very encouraging news, even though it is only anecdotal. I don't really run in those circles, so if you think about it, this turn of events is even more disturbing given the small sample size!

As a sanity check, I took a brief look at homes which fit my old criteria in the 95762 zip code. If all the PS homes were to close in one month, it would mean a 4.8 month supply...which is fairly modest. So there is at least some life in the market.

A Short Sale Saga

Some may recall, that during our house hunt, we pursued a short sale, twice. Here is a brief timeline and recap of the latest developments on it:

A flipper bought the home for $550,000 in March of 2007. At the time, she thought she was getting a great deal. With a first ($440,000 with National City and second lien for $55,000 with Countrywide). House was put up for sale in October of 2007 listed at $579,000 (then dropped to $550,000). She had worked out a deal with them to lower her payments while she tried to sell the house.

February 2008 - We submitted a written offer and negotiated with a seller on a short sale. Unfortunately, the bank would not approve the sale at our offer price (approximately 20% below asking). The seller did receive bank approval at 14% below their list price, and they immediately re listed the home (before we even responded that we wouldn't increase our offer price). We feel like we were played so that they could bring an offer to the bank and get a "bank approved" figure.
August 2008 - We resubmitted for the Short Sale that we tried for in February in the hopes that the bank would be more willing to negotiate now that 6 months have passed. We even paid $300 for an appraisal. The bank would not negotiate. We believe the home is now going into foreclosure.

According to Melissa Data and the Sacramento Bee Homes Sales Database, the home sold in June 2009 for $359,100. I was confused since it was way below what the first lien was.

I then checked the El Dorado County Assessors office, and the new owner is National City Bank (the first lien holder). The home hasn't shown up on the MLS yet. It was already in serious disrepair by the time we made our second offer (which was less than our first).

Side note: One part of this saga that really confused me was how an appraisal could come out at asking price....even though a home had been on the market for over 6 months at that price. A home is worth what someone will pay for it. If no one is willing to pay that price, then in my mind, it is not priced right. (Conversely, recent stories of homes not appraising for asking, even though there are 3 legitimate offers over asking....means a home is worth more than asking).

Having seen the home come through on both Melissa Data and Sac Bee, made me somewhat suspect of their data. It was my understanding their data did not include sales back to the bank. Thus any statistics (median price etc.) that are derived from these sources, will not be an accurate reflection of the market. Initially I thought perhaps the house was bought at auction, but the assessors office confirmed that the bank now owns the house.

I will be very curious to see how much the house actually sells for. I am guessing between 375k-425k depending on the shape its in (our last offer in August was $425,000 if memory serves me right).

Bank should have taken our first offer (pretty sure was more than what they were owed at the time). Obviously they had our best interest at heart ;) even though it didn't feel that way at the time.

August 2009 Market Stress Update - El Dorado Hills & Folsom

At first I thought stress indicators might be leveling off....but, as of the last two weeks or so, they don't appear to be.

At this point, all the local homeowner/investors I figured would end up in foreclosure, are somewhere on the list. In some small way, I find this encouraging, as I am hoping most of the troubled mortgages have been recognized, and no longer lurk ahead.

Frustrating Foreclosure Findings

Last year my father bought a foreclosure in Stockton. It wasn't an easy process. The bank was slow to capitulate, the realtor was pushing a lower offer that she was double ending etc.

With many other homes for sale on his street, my father is now attempting to purchase another foreclosed home for his mother (my grandma) so she can be nearby, but still feel independent. After much wrangling with my grandmother, he still had the bank to contend with. When he went to sign the papers on this modest home, he was in for a nasty surprise. The bank (BofA)included an addendum, which was over 15 pages, and was downright atrocious about it (giving a 2 hour window to sign etc.). As much as this home made for the ideal situation for my grandmother, I was pleased to hear that he walked away. In my mind, no home is worth signing away all rights and releasing all liability (and then some), the way they require in their addendum (especially on a home priced less than 100k).

We were in a very similiar situation and eventually walked as well. Our take away from the process, when bidding on a foreclosure, ask for the addendum up front.

Housing Market Stress Indicators - Folsom & El Dorado Hills

As many had predicted, homes in more desirable areas are now defaulting at an increasing pace. All three markets have surpassed previous highs. However the number of foreclosures has diminished as a result of the legislation passed last year (moratorium on NODs....so the pipeline dried up).

We haven't been in our new neighborhood long, but already we are hearing some of the stories (Bay Area lawyers abandoning their home etc.) and seeing some of the fallout it creates (tensions among otherwise very friendly neighbors).

Note: I have removed the period where foreclosures in Folsom shot up, by approximately 100 units, then just as suddenly went back down. I believe it was a data issue, and not a big bank purchase.

Pulse Check: The Good, Bad and Ugly

There has been a lot of speculation as of late, in both the media and on the blogs, that some sort of bottom is in sight. To paraphrase Calculated Risk, there are actually two housing bottoms, sales and price. I think Sacramento hit the sales bottom a while ago, with a fimly established year-over-year increase in sales trend.

So the real question is, "When do we hit a price bottom?" I can see why the debate has been lively. There are good arguments to be made for both sides.

Personally, I think we are seeing some seasonal firming, due to usual spring activity, coupled with a reduction in downward pressure from foreclosures (not as many foreclosures due to the effects of earlier legislation), BUT come this fall, we will see additional price declines as the backlog of NODs turns to foreclosures.

So now for the summary:

Good -

• Inventory is way down compared to the last couple years.
• Sales are up (which also helps bring inventory down).
• Pending sales in my (now monthly) screen scrape are close to a high.
• Interest rates have been hovering at an all time low making homes more affordable in monthly payment terms.
• Anecdotally, in some lower priced areas bidding wars are becoming common again.
• There are fewer foreclosures on the market (at least where I had been looking), due to the legislation that was enacted last Fall.
• People are saving money again and using less credit.
• Homeowners who are able (i.e. enough equity), have taken advantage of low interest rates and refinanced out of ARMs and into fixed rate loans.

Bad -

• Rents are falling, increasing the bar for the rent/buy break even calculation.
• Fewer people qualify for financing due to underwriting standards and lack of down payment.
• People are afraid to commit to such a large purchase in times of economic instability.
• Interest rates are likely to rise, which will reduce affordability and lead to stagnation.
• Tax credits (both Federal and State) artificially inflate demand.

Ugly -

• For the markets I track, NODs are reaching all time highs, now that the foreclosure moratoriums have been lifted.
• Alt-A and Prime loans are now starting to go bad. This is especially true for certain products like Option ARM and Neg_Am loans, as well as homes with a 2006 & 2007 vintage.
• Sacramento unemployment is in the double digits, with no reason to believe will abate any time soon.
• The state of California is in a massive budget crisis, which means cutbacks and furloughs, disproportionately affecting the Sacramento region.
• The full impact of the commercial real estate bubble are yet to be felt by the economy.

Hoping I will have time to put up the latest numbers in the coming days (things have been a little hectic for me lately on the day job...but I figure it's good that my skills are in demand).

Market Stress Update - April Fools?

The timing seems rather appropriate. If you will notice, the blue line with the black circle around it for Folsom REOs...... right around September it shot up, then mid March, it dropped back down. I don't have enough info to say if this is real or not. I would guess it's not, as I haven't been seeing the REOs show up in the MLS. The only semi-plausible answer would be a massive (over 100 homes) sale to an investor.

Just last month, I was expecting Folsom to see some serious downward pricing pressure (mainly based on this data), but it looks like, the shadow inventory is really a shadow and nothing more. With this turn of events, Folsom no longer looks like it will tip into the abyss as many have expected.

In any case, NODs for all three zip codes have now surpassed their previous legislation levels. I even had to adjust the scale to accommodate the number of NODs for Folsom (but El Dorado Hills is not far behind).

Market Stress Update - Back Where We Started

As of this week, NODs are back to the same peak levels prior to the enactment of legislation in California. The number of foreclosures has dipped slightly, but not in a very meaningful way.

This data still suggests to me that Folsom prices will have more downward pressure compared to El Dorado Hills. Looking at the ratio of REOs on http://www.metrolistmls.com/, compared to total foreclosures (gathered from http://www.foreclosure.com/), only 26% of REOs are listed for Folsom, compared to around 52% for EDH. In other words, there is 74% REO shadow inventory in Folsom, and 48% in El Dorado Hills. Some of this is likely due to processing lags, but 75% seems awfully high to me.

Separately, the ratio of all foreclosures to total MLS listings is very high in Folsom, around 54%, compared to 28% in El Dorado Hills.

Market Stress Update for Jan 2009

Last December I suggested that the supply of foreclosures would be slowly depleted as a result of the legislated delay in NODs. With no new NODs in the pipeline for a time, the existing foreclosures inventory will dwindle. So far things are moving along according to plan (see smooth lines on chart).

It is yet to be seen if the second half of my theory proves correct. In a couple months, fewer foreclosures will mean less downward pricing pressure. This in turn will giving the market a false sense of bottom come late spring. Unfortunately, it is false, because the NOD activity is rebounding with renewed vigor (see dotted lines on chart). The effects of all the new NOD activity on prices should be seen by late summer/early fall (given the current foreclosure timeline and pace of bank inaction).

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

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.

Market Stress Update Oct 2008

Some interesting developments over the last month. Folsom foreclosures shot through the roof, and NODs are down. If I had to guess this is a direct result of the legislation recently passed which requires lenders in CA to contact the borrower (or something like that). Mr. Mortgage has a write up if you want more details.....and his observations mirror what is happening here.

If this is the case, then starting real soon, we should see a surge in NOD activity.

I also started tracking market stress in Auburn last month, and should have some sales statistics to pair up with the market stress data for next month's update (courtesy of MCB44).

Surprisingly Savvy

For the last year and a half we have attended open homes when we don't have something scheduled on a Sunday afternoon.

Up till recently, I haven't been all that impressed with the Realtors we have met (yes I know, usually the junior folks looking to bring in business). Normally we get the typical "it's a great time to buy" routine. Sadly I often feel I know more about the local market forces than some of these professionals.

However at two recently open homes, bank owned homes in Serrano, we met very savvy and knowledgeable Realtors. It was so very refreshing to hear their take on the market.

In the past, maybe I was just looking for Realtor's that validated my world view......but these two guys, seemed to know the details of the broader market, and had some facts and data to back up their opinions. I am happily swayed by opinions that are backed with sound theories and data. Up till now, many of the Realtors I met rarely had much to back up their claims.

Perhaps its a sign of the times, maybe all the soccer mom Realtors have left the market, leaving only the seasoned veterans and business savvy. In any case, I was really pleased to have a real and honest conversation (up till now I only smiled and nodded, not wanting to argue why now is not really a good time to buy, especially at the price they were asking ).

The Irony of the Fall

It is ironic that the financial institutions, who are now going, hat in hand to Washington, still insist on playing hardball with their troubled borrowers, and those attempting to buy their properties.

Lack of oversight and public scrutiny exacerbated this financial meltdown as banks hastily approved loans and threw cash at anyone that could “fog a mirror”. So forgive me if I am incredibly nervous about the haste at which this rescue plan is coming together. Shouldn’t we subject the financial sector to the same scrutiny that they subject their troubled borrowers to?

From my feet on the ground perspective, the banks are making things worse by holding on to assets when they get a "reasonable offer." For example, the foreclosure my father purchased for under $140k in Stockton had a much higher bid on it back in May. We know because, the gentleman who put in the bid stopped by and asked what he paid for it. Our personal experience has been similar. Banks are holding out for more $$ only to pass up offers that will be considered generous in 6 months when they finally capitulate.

So my proposal is this…..If troubled borrowers are going to be given better terms by the Fed, how about we also make provisions that banks must make every attempt to sell their homes to people who will actually occupy them. This would help stabilize communities, and give first time buyers a fighting chance against all the investor money. It also puts something on the table for everyone…not just the ubiquitous homeowners.

Of course my favorite idea comes from Tanta of Calculated Risk:
"What I really really like is the idea of subjecting CEOs to the same petty humiliation everyone else gets treated to. I suggest that for every separate asset these CEOs sell to the government, they be required to write a Hardship Letter over a 1010 warning (that's a reference to the statute forbidding lying in order to get a loan) explaining why they acquired or originated this asset to begin with, what's really wrong with it in detail, what they have learned from this experience, and what steps they are taking to make sure it never happens again."