Mozart commented this morning:
“Like it or not, things are getting better. Home prices and incomes are balanced. Things are still tough but stability is great news. Extremely well qualified buyers are now the norm.”
“We’ll piddle along for the rest of the year. Substantial price gains are a ways out but this grind along the bottom is over.”
Demand has been steady enough that sales of bank-owned properties have been strong – additional REO listings should be welcomed by antsy buyers in all areas, unless supply overwhelms demand.
Buyers waiting for foreclosures can check this comparison for their specific area. The bolded areas below have had a significant increase in NODs and NOTSs over six months ago.
Here are the foreclosure counts from November 13th, and today:
| Town or Area | Zip Code | Nov. NOD/NOTS/REO | May NOD/NOTS/REO | diff |
| Cardiff | 92007 | 16/8/14 | 25/11/6 | +4 |
| Carlsbad NW | 92008 | 30/23/27 | 55/22/13 | +10 |
| Carlsbad SE | 92009 | 71/44/63 | 168/22/29 | +41 |
| Carlsbad NE | 92010 | 33/13/29 | 51/28/7 | +11 |
| Carlsbad SW | 92011 | 27/23/20 | 41/32/17 | +20 |
| Del Mar | 92014 | 15/8/12 | 21/6/4 | -4 |
| Encinitas | 92024 | 73/35/33 | 118/48/28 | +53 |
| La Jolla | 92037 | 49/36/28 | 95/53/14 | +49 |
| Oceanside | all | 659/326/980 | 852/539/295 | -279 |
| Poway | 92064 | 70/34/74 | 109/70/26 | +27 |
| RSF | 92067 | 10/4/6 | 20/6/1 | +7 |
| San Marcos N | 92069 | 152/93/184 | 232/137/68 | +7 |
| San Marcos S | 92078 | 122/71/135 | 188/107/45 | +109 |
| Solana Bch | 92075 | 14/6/16 | 37/15/5 | +21 |
| Vista | all | 340/189/410 | 486/308/146 | +1 |
| Sorrento | 92121 | 3/0/4 | 10/3/2 | +8 |
| West RB | 92127 | 90/46/58 | 152/78/24 | +60 |
| Rancho Pen | 92129 | 68/29/69 | 140/80/27 | +81 |
| Carmel Valley | 92130 | 39/20/30 | 93/63/15 | +82 |
| Total | above | 1,931/1,044/2,220 | 2,893/1,008/772 | -552 |
I didn’t bold Carmel Valley (and other areas) because I thought there are probably enough buyers to sop up the coming REOs there. In the bolded areas I’m not so sure.
Just going through the numbers, and people think the low-end has already been hammered.
Oceanside 852/539/295
Vista 486/308/146
etc,
The NOD’s and NOTS’s are going to turn into REO, and when that happens. . .
I think the hammer will be swinging again.
Nothing price cant solve.A little late to the game to be shorting housing you think?Easy money has been made.
There was easy money in SKF and SRS until the gov and fed started with the market manipulation.
I still believe that the more they intervene, the worse the result in the end will be. Let the NODs and NOTs go to REO finally and we’ll be one step closer to recovery.
I still think Mozart is insane for saying bottom, but time will sort out which one of us is correct.
Who’s Mozart
Mozart commented in the previous post and stirred it up a bit.
For his/her idea to be right, that we’ll ‘piddle along for the rest of the year’, it means that there won’t be a wild influx of new REOs at lower prices.
The way it’s been going, with the banks trickling them out one by one, “piddle” will probably continue.
The banks should have been flodding the market the last two months, during the buying season, if they wanted to liquidate their holdings. They would be crazy to do it in the fourth quarter – maybe next year?
“The banks should have been flodding the market the last two months, during the buying season, if they wanted to liquidate their holdings.”
Weren’t you commenting about how wise the bankers’ decisions with RE have been on some of your videos? Regardless, I think they’re getting hit by the timing of the foreclosure moratorium. Indications are that Notices of Default are being still being sent at very high rates, so we should see the post-moratorium climb in Notice of Trustee Sales in 90 days or so. (http://effectivedemand.blogspot.com/2009/05/california-foreclosures-for-april-2009.html)
The banks trickling out their REOs looks brillant in the short-term, but if the loan mods are a flop (as expected) these properties are going to stockpile.
With 5-10 offers on every REO in Oceanside, that’s one place they could have let a few more out of the barn.
I’d agree that things are looking better out there. However, just because the cat is bouncing a bit doesn’t change the fact that it’s dead.
I don’t know a single company that is hiring. Almost everyone I know is a hair away from being fired, or already at the unemployment office.
It certainly appears the business environment is improving. Deals, while greatly reduced in price, are starting to get signed again.
But I equate it all to someone who’s been holding their breathe under water for too long. Yes, oxygen is getting back into the system – but treading water is not swimming.
Wage inflation? This year? Please, nowhere in sight.
Record number of NODs, a quick search in RedFin shows a massive number of unrealistic sellers, etc.
Maybe the big price drops are over. But I’d argue at a minimum that the quality and quantity of houses on deck to hit the market has only one way to go… up.
The great thing is we’ll all find out in a few months what reality is. People have been calling the bottom since the very top, because it’s all based on wishful thinking. When we do eventually bottom, it’ll be purely by coincidence.
Now let’s talk facts. There are a record number of foreclosures coming our way, and they’ve been stockpiled during the multiple moratoriums. Unemployment is terrible and worsening, though by definition it will always be better and worse than some people predicted. We have a wave of ALT-A loans that are underwater and will recast over the next several years. Studies show a substantial number of people who would sell with any modest price appreciation, forming an upper barrier on price.
Instead, what we see today is a return to early 2000s mentality of wishful thinking mixed with self serving greed. Good luck with that!
you wont know for at least a year if this is in fact the bottom.
In las Vegas in the lower end the bottom is in. Mid and High end is a different story .
same will be for you guys. However I think your lower end still has room to go on the down side until media hits 2000 and 2001 levels in all areas.
Picture a Slinky. When the head end reaches the bottom of the stairs, the tail is still up a few steps from the bottom. It will get there eventually, but when talking about home prices, one needs to make clear which end of the slinky they’re talking about.
I believe the banks did what they did to show positive signs to wall street during the first two or three quarters of this year. If they had flooded the market with all of the homes that should have gone to foreclosure, their entire balance sheets would have looked worse than subprime. Instead, wall street and the lemming public are thinking that we’ve hit bottom and that by this time next year we’ll be kicking ourselves for missing this historic buying opportunity. (scoffs!)
“In las Vegas in the lower end the bottom is in”
67.2% of Las Vegas homes underwater:
http://finance.yahoo.com/real-estate/article/107041/House-Price-Drops-Leave-More-Underwater
If I had to place a bet, I would say the bottom has not been reached in Vegas – in any market segment.
sdnerd,
I’m curious to see what is going to happen to all of these folks that are severely underwater, either due to bubble purchasing, refinancing during the bubble to pull out equity or maxing out on the home ATM.
What will the banks do? Will they do principal right downs? If they foreclose on all of them, who will be there to buy all those REOs? Once the banks wise up to all of those non-performing assets on their books, they’ll have to do something.
This site gives a good snapshot of how messed up most of the market still is. It’s amazing to see some of the numbers and wonder who would possibly agree to them, be they borrower or lender.
http://www.realquestinvestor.com/rq/default.aspx
On the low end In Vegas we have pricing averging what they were in 1998. I have had a few REO that are lower than when they sold new in 1987.
My average low end REO is around 80k right now. these were all selling for 250-290k in 2006.
Yes 2/3 of vegas is underwater, but it seems that every person who ever wanted to buy a home or second home in vegas in the entry level range is doing so. Especially as the build cost is approximately double.
So I am expecting to see a slight rise in low end housing prices with a continued crash in mid and high levels. Currently the high end is still priced around late 2003 and early 2004 prices.
also I would like to give a shout out to Jim – this is a great forum and source of info and you should be very proud of it.
thanks for the info and looking forward to the crashing of the “WEST OF THE fIVE ” stuff in the next 2 years.
Jim,
I don’t think it is particularly helpful to compare “diff” the total of NOD, NOT, REO between time, since one (now almost inevitably) leads to the next.
For prognostication, it seems to me comparing only NODs is the interesting statistic for the future.
It also reveals that most zips are +100 or more!
It should be said that bottoms can last for years. And nobody knows it’s a bottom until its over.
This is terrific news. I’m ready to buy in 92078 as soon as the all cash offers clear. I would just love to call on a property and not have 10 offers already in.
Remember that REOs aren’t a requisite of price declines. However, they do help to provide liquidity in a delusional market.
As I see it, the longer the banks wait to clear their inventory, the more money they will lose. As JtR stated, the loan mods are a sham and only make the inevitable worse.
Banks are going to continue to let the air out slowly. In the end, the consumers suffer because the banks will pass on the cost of doing business by nickel and diming conumers to death.
Banks, government, stock market are in total disconnect with the real economy. Real world is pretty ugly…
Well, I feel special this morning.
I do think, based on direct conversations with bankers, that the banks will hold back on supply, slowly release them with the hope of prices going up particularly for the middle/low tier.
The much anticipated foreclosure tsunami will not materialize. We’re still looking at catching-up on the moratorium which restricted and distorted the supply of foreclosures.
Banks are also very, very willing to work with their borrowers now. They realize that just foreclosing is a lose/lose.
Lastly, unemployment is bad but everyone here has to recognize that it is easing. Anyone who has worked in a corporate environment will know who gets laid-off first. After that there’s increased efficiency and ultimately profit.
Watch for better economic news monthly, a better Christmas retail season and a take-off in March 2010 for the economy.
That’s my totally unqualified opinion.
vegas nrba:
I don’t see a big crash west of I5 coming.
* No big tracks we’re built
* Older homes with slower turnover
* People usually don’t want to move once there
* Influx of interested parties to buy west of 5
* Don’t underestimate the “Power of the Ocean”
A two-time contest winner Freedom CM remarked,
Jim,
I don’t think it is particularly helpful to compare “diff” the total of NOD, NOT, REO between time, since one (now almost inevitably) leads to the next.
For prognostication, it seems to me comparing only NODs is the interesting statistic for the future.
It also reveals that most zips are +100 or more!
Agreed, and I had written the entire post comparing the NODs, but changed it.
Because of the inefficiency of these hitting the market, I figured that the NOD + NOTS + REO = bank inventory for next 6-8 months, and comparing the overall totals might be a better read.
The NODs are likely to get spread out over the next 6-18 months, with loan mods and bankruptcies delaying many from foreclosing promptly.
(IOU Padres tix for this season from the last contest you won!)
Recession is officilly over!!!!Go buy an overpriced house in san diego and forget all your problems.Obama is here to give you what you need to succeed.
The loan mods, if they materialize in significant numbers, and going to have a big and (I believe) unprecedented effect. People will be living in houses whose cost to own is not reflected in the sales price they paid for the house. Yet the sales price determines the real estate comp value. That disconnect is going to be odd, and certainly detrimental to any new buyers.
How do the proposed loan mods work? Is it a simple forgiveness? Is the forgiveness taxable? If the loan gets squished down but comps stay the same, it seems to set up a situation for windfall profits someday when everything has recovered.
What about the massive pile of loan resets coming due?
Mozart.
Huh…
Interesting ideas.
So, you think banks will keep supply on the sidelines intentionally?
Really?
What do you think the OTS will think about that? What about any other regulator?
Do you really think any regulator will allow nonperforming assets to remain on the books for any length of time?
Seriously?
I have to ask you then, what do you know about banking regulations that banking regulators don’t know?
Just wondering how we’re going to miraculously change the incentive structure of the OTS.
Thanks,
Chuck
I’m a great candidate for a loan modification from Chase. I have been holding out since the beginning of the year – yes paying my mortgage all the while being laid off. I’m taking the moral high road on this. However, the next few mons will be a good time to finally push the paperwork through as the bank/servicers have had a few mos practice screwing up loan application portfolios for those that applied earlier.
From the data, it’s hard to see exactly what’s going on, other than in May, there are a lot of NODs.
What would be interesting is to pull the Dec-Apr data and see the trend.
While Mozart may be close somewhat close on his guess for the economy for later this year and 2010, it’s hard to believe that unemployment is going anywhere but up well into the beginning of 2010. Therefore, I’m not sure there is any catalyst for large number of home sales in the mid-upper tier at current prices. Ultimately, prices are relatively expensive (mid-high tier) with the outlook for higher taxes, massive cuts in CA state spending, and increased individual contribution for health care since Medicare is insolvent. Especially in the new neighborhoods where you pay 1.7%+ property tax.
Wow, some comments would give one the impression we’d just encountered a brief blip of a recession and we’re soon headed back to a “party like it’s 1999” atmosphere.
The world economy is still headed south, the US economy is still headed south, and housing is still headed decidedly south. No brief bubble-echo is going to change that.
I’m not about to jump on the party train when the bridge is still out ahead.
p.s.: The bottom for Las Vegas “low end” is a lot closer to *zero*. A sustainable economy of that size is not based upon gaming/tourism (sick) and construction (dead).