This chart makes it looks like foreclosures are on the rise lately, but don’t be too impressed – these monthly foreclosure counts are half of what they were two years ago.
There are still 10,504 properties on the NOD and NOT lists in San Diego County, and of the 193 that were on yesterday’s trustee-sale list, only 15 were actually foreclosed. Interestingly, only 23 were cancelled; the other 155 (80%) were postponed:
As unpalatable as it sounds, a working paper paper from the National Bureau of Economic Research finds that delaying foreclosures and trying to keep distressed homeowners in their properties is actually worse for local housing economies.
Their proposed solution is to speed up REOs.
The Cambridge, MA thinktank provides the beginning and end dates of U.S. recessions and prides itself on unbiased, economic research. But this will be of little solace to those who will no doubt object to the findings.
Here’s the bomb:
“Our results suggest that the key to minimizing the costs of foreclosure is to minimize the time that properties spend in serious delinquency and in REO. On one hand, this implies putting pressure on lenders to sell properties out of REO quickly,” concludes the paper.
“On the other hand, and perhaps much less palatably, it implies minimizing the time a borrower spends in serious delinquency, which means accelerating the foreclosure process,” they claim.
Researchers Kristopher Gerardi, Eric Rosenblatt, Paul S. Willen and Vincent Yao did their homework on this report. They show that “foreclosure externalities” such as houses sell at lower values, albeit not by much, simply by having neighbors delinquent on the mortgage. But they can’t explain exactly why.
“We discuss three possible explanations for the facts: supply effects, demand effects, and investment externalities, and argue that the third is the most plausible,” they say. “But to be sure, the interactions of all three are so complex that no dataset and no model could likely completely rule out an explanation or precisely allocate the observed correlations to one of the three stories.”
The researchers also point out the right-to-cure law in Massachusetts, passed in 2007, forced lenders to give borrowers an additional 90 days to cure their mortgage before foreclosure proceedings could start. Those borrowers benefited little from such legislation, as qualified homeowners were no more likely to cure the mortgage than other residents of the state.
“One might say that the law only failed to produce benefits, but our analysis suggests that it may also have imposed costs on homeowners who lived near borrowers who were able to take advantage of the law,” they state.
To the general public, the information comes as a total shock. So far, there is no press on it. Perhaps this blog post will change that. More importantly, this will not come as news to HousingWire readers — thus explaining the logic of a blog post and not a more noticeable feature.
Actually, to quote publisher Paul Jackson in March 2010, “Recovery in housing is spelled R-E-O. Anything else is wasting time until we get there.”
Hat tip to Susie for sending in thisfollow-up story on the mistaken foreclosure:
Alvin and Pat Tjosaas, a retired couple in Woodland Hills, Calif., had the bad luck of having their home mistaken for a neighboring foreclosed home and being cleared by contractors hired by Wells Fargo — not once but twice.
A retired bricklayer, Alvin Tjosaas, 77, was the caretaker of his late parents’ two-bedroom home in Twentynine Palms, about 200 miles east of his home in Woodland Hills, north of Los Angeles. He is a part owner of the home with his sisters.
Alvin Tjosaas visited the home every four to five months, he said, for maintenance and to work on hobbies in the garage.
“He just loves it up there,” Pat Tjosaas, 75, said. “He was in the process of getting ready to re-plumb the house, so he had lots of his tools up there – just a garage full of tools that any man would die for.”
Hat tip to daytrip for sending this in, fromCBSLA:
The owners of a modest home near Twentynine Palms lost their cherished possessions after a bank mistakenly foreclosed their residence. A crew broke into Alvin and Pat Tjosaas’ desert home and took everything after being directed by Wells Fargo to secure the structure.
The couple, however, didn’t have a mortgage on the home.
Alvin said the deputy sheriff said, “Good news, we know who took (your possessions)…Wells Fargo. Bad news, your stuff is all gone.”
All the married couple has now are three generations of memories.
Alvin, a retired mason, built the home with his father when he was a teenager.
“I know every inch, every rock…my mom mixed all the cement by hand,” he said. Alvin and his wife would later bring their six children to their desert oasis. “My little kids (would) come out here and their dresses were the same color as the wildflowers,” said Alvin.
A spokesman for Wells Fargo released a statement apologizing to the couple.
“We are deeply sorry for the very personal losses the Tjosaas family suffered as a result of their home being mistakenly secured,” said Alfredo Padilla. “We are moving quickly to reach out to the family to resolve this unfortunate situation in an attempt to right this wrong.”
Alvin and Pat remain distraught.
“When you put your heart into something…it makes me real sad. I’m just glad I have my sweetheart. We’ve been together a long time,” said Alvin.
Elvira Grau, the Englewood-based party planner who appeared on “The Real Housewives of New Jersey,” and her husband have lost their $3 million Cresskill home to foreclosure.
It’s one of a growing number of high-end foreclosures — a sign that housing distress is not limited to lower-income neighborhoods.
Elvira and James Grau own Space Odyssey, a former warehouse in Englewood that they bought in 2005 and turned into a 26,000-square-foot entertainment venue. Elvira Grau made an appearance on “The Real Housewives” reality show in 2010, planning a party for one of the show’s stars, Teresa Giudice. But the Graus were apparently not able to keep up with the $17,500 monthly payments.
Hat tip to daytrip for sending this in, fromjalopnik.com:
(1965 Ferrari 275 GTB above)
According to a tip from a Jalopnik reader, the owner of 12 Ferraris — plus an incongruous but very cool Ford Thunderbird — also owned a real estate company that went bankrupt. Unfortunately, he had all the cars parked in a building owned by the company, so they’re up for auction now.
Nice one, genius, next time, build a 15-car garage at home before you go bankrupt so that you can keep your cars until you default on the mortgage.
There are some real gems in the collection, including a 1985 308 GTB Quattrovalvole starting at a bargain basement $21,000, as well as an absolutely gorgeous 1965 275 GTB. Bidding on that one will begin at a not-so-modest $502,000, but you get what you pay for; it’s sex on wheels.
Also up for auction are two 328 GTSs, a 348 TS, a 365 GTB4 Daytona, a 456 GT, a 456 GT, a F355 Berlinetta, a Mondial T, two Testarossas, and a 1990 F40 that someone has decided to start at $226,000.
Everyone knows that in real estate, it’s location, location, location.
So San Diego real estate agent Marco Manuel Luis arranged for a couple to buy a home in exclusive Rancho Santa Fe for more than $2 million.
But now, because of his role in finding financing for the purchase, Luis will live in a new location: federal prison.
The 32-year-old Luis was sentenced Monday in San Diego federal court to 48 months in prison after pleading guilty to arranging phony loan documents that hid the fact the buyers’ income was from drug profits. The loan documents also involved purchase of property on Palomar Mountain.
The Rancho Santa Fe buyers, Joshua Hester and Kelsey Wiedenhoefer, were part of a massive marijuana-growing operation, according to prosecutors. Both have pleaded guilty.
The dopers paid $2,050,000 in May, 2007 – Chase sold it for $1,130,000 in June, 2012:
From CAR – scroll down to chart showing SD County #2 in state; only San Mateo County is lower:
LOS ANGELES (Aug. 23) – A continued shortage of available homes on the market impeded California pending home sales in July, but pending sales were still higher from the previous year for the 15th straight month, CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.
Pending home sales data:
C.A.R.’s Pending Home Sales Index (PHSI)* fell 4.2 percent from a revised 121.2 in June to 116.1 in July, based on signed contracts. Pending sales were up 2.8 percent from the 113.0 index recorded in July 2011. July marked the 15th straight month that pending sales were higher than the previous year, but July’s year-over-year increase was the smallest in the past year. Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market.
“We continue to see a strong demand for housing, but the California market is being hindered by a lack of inventory and multiple offers on what little inventory that is available,” said C.A.R. President LeFrancis Arnold. “The shortage of inventory has had the most dramatic effect in the REO market, where the available inventory stands at a 1.5-month supply and the share of REO sales dropping 35 percent over the past year.”
Distressed housing market data:
• The share of equity sales – or non-distressed property sales – compared with total sales continued to expand in July. The share of equity sales increased to 59.5 percent in July, up from 58 percent in June. Equity sales made up 52.4 percent of all sales in July 2011.
• The share of REO sales statewide shrank further, while the share of short sales increased. The combined share of all distressed property sales fell to 40.5 percent in July, down from 42 percent in June and down from 47.6 percent in July 2011.
• The share of short sales increased in July to 22.6 percent, up from 21.4 percent in June and from 18.8 percent a year ago.
• Of the distressed properties, the share of REO sales dwindled in July to 17.4 percent, down from 20.2 percent in June and 28.6 percent in July 2011.
• The available supply of REOs for sale remained constricted in July, with the Unsold Inventory Index standing at a 1.5-month supply in July 2012, essentially unchanged from 1.4 months in June. The July Unsold Inventory Index for equity sales stood at 3.8 months and was 4.2 months for short sales.
Recent research suggests that properties near foreclosures normally suffer falling home prices, but a new paper from the Federal Reserve Bank of Atlanta challenges the claim.
It’s the condition of the distressed property progressing through the foreclosure process that weighs most heavily on home prices in the area, not the finality of foreclosure itself, the study found. The negative effect on nearby home prices actually peaks before the distressed property even completes the foreclosure process.
After foreclosure, when a lender-owned property is in below-average condition, nearby houses will trade at lower prices; when it’s above average condition, nearby homes will trade at higher prices.
But even then, if there’s a delinquency or foreclosure down the street, there’s not a huge economic effect on the prices of nearby homes.
The study found that a property in serious delinquency for less than a year or a property foreclosed on and now owned by the bank reduces values of homes within a tenth of a mile by about 0.5% to 1%, “an amount that would most likely go unnoticed by the typical seller who does not have many distressed homeowners living nearby,” according to the report. Researchers analyzed housing information, including public records in 15 metropolitan areas, with a focus on single-family homes.
“We find that while properties in virtually all stages of distress have statistically significant, negative effects on nearby home values, the magnitudes are economically small, peak before the distressed properties complete the foreclosure process, and go to zero about a year after the bank sells the property to a new homeowner,” the authors wrote in the report.
“The estimates are very sensitive to the condition of the distressed property, with a positive correlation existing between house price growth and foreclosed properties identified as being in ‘above average’ condition.”
It’s assumed that the owners of the distressed properties aren’t making as much investment in their properties or are doing as much general upkeep as foreclosure looms. And that’s what’s impacting nearby prices.
“The most important take-away is the effect [on nearby home prices] starts when the property is delinquent. It’s not the foreclosure itself that is the problem,” said Paul S. Willen, an economist at the Federal Reserve Bank of Boston and co-author of the report, in an interview.
In order to minimize the effects that foreclosures have on the surrounding area, it’s best to minimize the time that a property spends in serious delinquency and in bank-owned status, the authors concluded. To do that means accelerating the foreclosure process and putting pressure on lenders to sell bank-owned properties more quickly.
Moreover, policies that delay foreclosures, slowing down the transition from delinquency to foreclosure, don’t protect the neighbors, Willen said. These policies are exacerbating the effect of distressed properties.
“When you talk with community groups… they’re aware that long, drawn-out foreclosures are not good for the community,” Willen said. “The first choice is for the foreclosure to be prevented in a way that is good for the investor and the homeowner. Failing that, it’s good to get this process done it a faster, more humane way.”
The study found that a property in serious delinquency for less than a year or a property foreclosed on and now owned by the bank reduces values of homes within a tenth of a mile by about 0.5% to 1%, “an amount that would most likely go unnoticed by the typical seller who does not have many distressed homeowners living nearby,” according to the report. Researchers analyzed housing information, including public records in 15 metropolitan areas, with a focus on single-family homes.
