by Jim the Realtor | Dec 22, 2011 | Shadow Inventory, The Future |
Hat tip to daytrip for sending this along, from the latimes.com:
Reporting from New York—Slips of paper are pasted to the broken door of the corner row house, violations for the garbage piled near the front steps. The stench of trash wafts up the dark interior stairway, where an ashtray filled with cigarette butts sits like an abandoned potted plant on the second-floor landing.
Nobody lives here, at least not officially.
But as you climb the narrow stairs to the top floor, a door opens into an airy apartment that is home to Tasha Glasgow, who is part of a largely invisible population of squatters occupying vacant homes across America. Given their clandestine lives, it’s impossible to say how many people are squatting in this country, but with more than 1.3 million homes in foreclosure and hundreds of thousands of people homeless, advocates say it’s safe to assume the number is growing.
“You have these abandoned dwellings that are sitting there vacant, sometimes for many months,” said Patrick Markee of the Coalition for the Homeless in New York, where shelters are reporting record numbers of residents. “It’s not an issue of whether squatting is right or wrong. The fact is that people are desperate for places to live, and they’re going to do what they need to do.”
(more…)
by Jim the Realtor | Dec 4, 2011 | Foreclosure Count, North County Coastal, Shadow Inventory |
There were 127 SFRs on the A-list in North SD County Coastal last week; here are the results:
Scheduled NSDCC SFR Trustee sales, Nov 28th – Dec 2nd:
| Trustee-Sale Results |
Number |
Listed on MLS in last year |
| Back-to-bene |
6 |
2 |
| 3rd-party buy |
2 |
0 |
| Cancelled |
15 |
5 |
| Postponed |
104 |
29 |
| Totals |
127 |
36 |
Only 28% of the properties on the auction list were trying to sell – the rest are either bucking for a loan mod, or going down with the ship – which category they’re in probably doesn’t matter much, because most will shake out over the next few years.
With only 6% actually losing their house (8 of 127), this will drag on a while. There are 355 SFRs on the auction list; the rolling gob of free-rent goo that, for the homeowners, feels like purgatory. Hopefully the servicers can speed it up for everyone’s sake!
by Jim the Realtor | Nov 15, 2011 | Foreclosure Count, REO Counts, Shadow Inventory |
We thought the August blip of increased NOD filings might be a one-time event, but it looks like the servicers are keeping up the pace. Hopefully it’ll translate into more trustee sales:
Unfortunately, we know that a surge of NODs and about $4 will get you a cup of coffee, but at least the cancellations are moderating – though they are the dominant number:
by Jim the Realtor | Aug 18, 2011 | Double Dip, Shadow Inventory |
More from C-L on the delinquent mortgages – can we work our way out of this?
We are hitting the peak months of resets/recasts, yet delinquencies are dropping?
The banks/servicers must be working feverishly to reset/recast the expected $1.6 trillion in ARMs, or just not reporting lates? When this is all done, will anyone be surprised that a whole lot of people got a whole lot of free rent?
(Click on this image to enlarge)
by Jim the Realtor | Aug 8, 2011 | Double Dip, Market Conditions, Shadow Inventory |
Thanks to SM for sending this in – click on image for clarity:
by Jim the Realtor | Aug 2, 2011 | North County Coastal, REO Counts, Shadow Inventory, Short Sales |
We tend to spend a lot of time on short sales and foreclosures, what percentage of the market are distressed sales in the North San Diego County Coastal region (La Jolla to Carlsbad)?
The REO and short-sale MLS detached listings that have closed escrow equal 19% of the overall market, year-to-date.
The 2011 year-to-date breakdown of closed sales, and avg. cost-per-sf:
| 2011 |
REOs |
Shorts |
Others |
| Jan |
17/$270 |
18/$311 |
114/$389 |
| Feb |
19/$285 |
23/$307 |
124/$403 |
| Mar |
20/$293 |
29/$307 |
189/$389 |
| Apr |
16/$284 |
19/$277 |
199/$389 |
| May |
26/$292 |
17/$269 |
200/$404 |
| Jun |
15/$343 |
16/$304 |
218/$382 |
| Jul |
16/$272 |
26/$310 |
171/$392 |
| Totals |
129/$291 |
148/$299 |
1,215/$392 |
Four out of five this year have been regular sales.
The cost-per-sf is also influenced by location – 64% of the SS/REO closings were in Carlsbad/Encinitas.
I think we’ll see an increase of short sales over the next 24 months, unless lenders dig in over SB 458 and reject more of them. If they decide on a case-by-case basis, they’ll probably be inclined to deny those with bigger loan amounts, and take their chances that a collection agency will be able get more after the foreclosure than the a couple of thousand dollars they’d get out of a short-sale.
by Jim the Realtor | Jul 30, 2011 | Forecasts, Market Conditions, Shadow Inventory |
There are many different pieces to the puzzle, here are a few more.
Jiji has posted this thought a couple of times:
Housing is broken, Agents , insurance, remodelers , landscapers, finance, escrow, builders etc… the list goes on and on. What must never be said,
YOU WILL NEVER HAVE AN ECONOMIC RECOVERY UNTIL THE MAJORITY OF UNDERWATER HOME OWNERS ARE NO LONGER UNDER WATER.
I’m not sure we’ll recover any of the old economy; instead those who are creative and desperate enough, will find a new way to get by. It will need to be independent from housing, because once the underwaterness is resolved, those who are left probably aren’t going to be moving much either.
Here’s why:
1. UP OR DOWN-SIZING – Price-wise, to move up or down, you need to change by 50% or more to make it worth it.
It doesn’t make sense to sell for $600,000, and buy for $750,000 – you don’t get enough extra house to make it worth it, and the closing costs are prohibitive. But even if the costs got down to 1-2%, very few homeowners need a slightly-bigger house. Don’t be surprised if you see in the future a JtR-supported remodeling enterprise to assist those who just need an extra bedroom or two.
2. DOWN-DOLLARING – Sellers who want/need to bank some real money will have to leave town.
Those hoping to cash-out will need to leave town, and possibly the state, to net a few hundred thousand dollars. How many homeowners are willing to leave? Those buying now are here for the duration, so the down-dollarers who do leave are part of the cleansing. How many weak hands are left? Admittedly, it could be a large group, but they will likely hang on as long as possible.
3. MORE RENTERS – There is going to be increasing pressure on rents.
Those in both the categories above who do sell, will try to stick around, and renting is a great temporary option. For many it will be permanent, especially those who have family here because as they get older they aren’t going to leave town, just to buy a house. Others moving here from out of town will prefer to rent, mostly because of the difficulty with buying smart.
Upward pressure on rents will impact the good-looking family homes in quality school districts.
4. STAYING PUT – Baby boomers are prime candidates to be moving.
According to Wiki, baby boomers control over 80% of personal financial assets and more than 50% of discretionary spending power. Do they have one more move in them? I don’t think so – after investigating the three categories above, many, if not most, will end up NOT moving, and make due with that to which they’ve become accustomed.
There will be great reluctance to selling from now on.
Hopefully we’ve learned a big lesson in this downturn, and people will be more reluctant to load up on debt too.
Which leaves just the out-of-towners, and first-timers, for homebuyers.
Those underwater are just part of the equation, and may just help with expediting the inevitable.
by Jim the Realtor | Jul 23, 2011 | Shadow Inventory |
From HW:
Although the drop in default rates shows promise, the amount of shadow inventory still creates a dark loom over the future of housing prices, according to latest results from Standard & Poor’s U.S. Residential Performance Index.
The shadow inventory of unresolved distressed properties is currently at an estimated $405 billion, representation four years of housing inventory and one-third of the outstanding U.S. non-agency residential mortgage debt.
The report states that full recovery will only occur once the supply of distressed properties shrinks to less than a quarter of the current volume.
Additionally, the monthly liquidation and cure rates are at about 2.5%. This stems to an overall resolution rate of 5%, where these rates have lingered in the past nine months. (See chart below)
The slowing first default rates seen on the chart allows borrowers to resolve loans and clear out the inventory instead of defaulting and adding more, S&P said in the report.
by Jim the Realtor | Jul 5, 2011 | Principal Reductions, Revolution, Shadow Inventory |
Four posts back was the article about principal reductions – below is the response from Irvine Renter, or click here to his blog:
To give the hopeless a reason not to strategically default, several banks have singled out a few deeply underwater loan owners for principal forgiveness. By spreading news of their magnanimous deeds, they hope the remainder will keep paying.
Banks have a problem, a riddle they must solve. Twenty-five percent of their borrowers are underwater, and when you factor in second mortgages and sales commissions, more than half can’t sell their homes without writing a check for the shortfall. And house prices are still going down. When homeowners have no equity, they are no longer homeowners, they are loan owners. If a loan owner’s payments are less than the cost of a comparable rental, they have an incentive to stay and pay, but when the payment exceeds a comparable rental — and the huge mortgage balances of the bubble make this common — loan owners have an incentive to keep their money and strategically default on their mortgage.
Underwater loan owners have their names on title, and if they keep making payments long enough, amortization may catch them up, and prices may come back, so they may have equity again someday. The more their payments exceed the cost of rental, the further a loan owner is underwater, and the longer they perceive they will have to wait to have equity again, the more likely they are to give up and strategically default. If a loan owner strategically defaults, the lender is forced to make a choice; foreclose on the property when the resale value is worth less than the loan, or allow the loan owner to squat in the property.
Neither choice is palatable to the lender.
Lenders have responded to these circumstances — conditions the lenders created through irresponsible lending which inflated the housing bubble — by using both a carrot and a stick to keep borrowers paying when it is in the best interest of the borrower to strategically default. The stick is the threat of foreclosure, debt collection, reduced access to credit in the future, and an appeal to morality. The specter of consequences to borrowers has been wildly exaggerated, and these circumstances are lessening by the day.
The appeal to morality has been steadily eroding, as borrowers are coming to realize they have a greater moral responsibility to their families, than they have to their lenders.
Lenders’ threats of foreclosure have been neutralized by reports of delinquent mortgage squatters obtaining years of free rent. In fact, instead of being a deterrent to strategic default, the long foreclosure timelines have actually become an inducement. Lenders combat this perception with the use of terrorist tactics. Each month, lenders will randomly select a small number of fresh delinquencies to push through the system as quickly as possible. If some of the herd are executed quickly while others are allowed to squat indefinitely, it creates uncertainty. This uncertainty keeps some paying rather than play Russian roulette.
The carrot lenders dangle in front of loan owners comes through rumors of principal reduction windfalls. Like the random executions of freshly delinquent borrowers, a very small number of principal reductions given to loan owners who are doing what lenders want — making all payments — provides the lottery-style false hope to motivate the masses. Today’s featured article is part of the public relations campaign lenders use to get the word out concerning the principal reduction lottery windfall ostensibly available to loan owners who dutifully make their payments.
If someone somewhere got a principal reduction, it could happen to anyone. I hope nobody is holding their breath.
by Jim the Realtor | May 17, 2011 | Shadow Inventory, Strategic Defaults
From HW:
The trend of borrowers choosing to default on their mortgage when they otherwise might have been able to afford payments is on the decline, JPMorgan Chase analysts said Monday.
Definitions for what qualifies as a strategic default varies. But analysts took a deeper look in the report. One widely held requirement for strategic default is that the borrower stops making payments when the property loses equity, meaning the mortgage is worth more than the underlying home.
JPMorgan analysts used Standard & Poor’s/Case-Shiller indices and tracked prices against original loan amounts on a metro level. Then, analysts collected counts for all defaulted loans since 2007 and tracked those that started missing payments once the loan went underwater.
They found 60% of all defaults were strategic by the middle of 2009, more than double the percentage in January 2008. But analysts wanted to get more specific.
Using data from Equifax, the JPMorgan analysts looked at which borrowers did not experience a monthly payment increase before defaulting. Then, they added in which borrowers were still making payments on other debts after missing their first mortgage payment.
The final definition of strategic default used was the “percentage of defaults from underwater borrowers who started missing payments once underwater, continued paying their other debt, and had no payment increase on their mortgage.”
While the analysts admit they might still be overestimating the amount of strategic defaults when accounting even for all these variables, they noted the trend is going down.
Across the private-label mortgage-backed securities market, the analysts found 10,000 strategic defaults fit their definition, down from nearly 20,000 one year ago.
“Overall, strategic defaults have stabilized as home prices flattened, and initial jobless claims declined,” analysts said. “A trend worth watching, no doubt, but we can comfortably say that strategic defaults are less than 30% of all defaults, and the pipeline of borrowers [delinquent more than 90 days] has even lesser strategic delinquencies.”
But there is still the possibility of the trend heading upward. The latest offer from the 50 state attorneys general in the foreclosure investigation includes provisions that allow for some borrowers to receive principal reduction. In March, at least four of the AGs sent a letter to the others, warning that such requirements may only attract more borrowers into strategic default.
Currently, 42% of underwater borrowers remain current on their mortgage, according to the JPMorgan Chase analysts. And they also warned of the risk these borrowers pose.
“Of course, the moral hazard of potential strategic defaults in the future is still present. Even though these borrowers have not been defaulting in large numbers, the event risk remains that they could,” analysts said.
Reporting from New York—Slips of paper are pasted to the broken door of the corner row house, violations for the garbage piled near the front steps. The stench of trash wafts up the dark interior stairway, where an ashtray filled with cigarette butts sits like an abandoned potted plant on the second-floor landing.
