Posted by Jonathan J. Miller -Monday, March 19, 2012, 12:10 PM
Catching up on from late last week…RealtyTrac released their February 2012 US Foreclosure Report which showed:
Foreclosure Activity Dips Nationally, But 21 States and DC Post Annual Increases
Judicial Activity Up 24 Percent Annually, Non-Judicial Activity Down 23 Percent
It is interesting that there was a pronounced overall difference between judicial and non-judicial states. The recent mortgage servicer settlement with the US State Attorney Generals had resulted in a larger backlog in judicial states (foreclosures go through the court system).
The other big item in the report was the fact that half of the nation’s largest cities saw an increase in foreclosure activity.
The metro areas with the highest foreclosure rates among the 20 largest were Riverside-San Bernardino in California (one in 166 housing units), Atlanta (one in 244), Phoenix (one in 259), Miami (one in 264) and Chicago (one in 302).
I thought it was telling that two of the best housing markets in the country performed very differently – NYC v. DC. Rules and regulations play a key role in determining how quickly a market clears itself of excess distressed housing stock.
New York City metro had the smallest foreclosure rate by far with 1 foreclosure in 3,439 housing units, about 1/3 the rate of Washington, DC’s 1,198. Of course it probably only means that DC will be rid of its foreclosure housing stock much faster than NYC since New York state takes longer (over 1,000) days to process a foreclosure than any other state.
- Foreclosure Laws and Procedures By State [RealtyTrac
- February 2012 U.S. Foreclosure Market Report [RealtyTrac]
Posted by Jonathan J. Miller -Thursday, February 16, 2012, 9:31 AM
After a reprieve in 2011, and a key reason why prognostications of a US housing market bottom is misguided, RealtyTrac reported that foreclosure filings were up 3% in January, month-over-month. Notice of defaults, however, are still depressed, down 22% from a year ago and unchanged from the prior month.
The 3% is statistically insignificant and I am not being an alarmist, but it represents the beginning of the distressed sale ramp-up now that the mortgage servicing settlement has finally been hammered out (actually the increase occurred before the agreement was final).
Daren Blomquist with RealtyTrac said increased foreclosure activity in key judicial foreclosure states is the likely result of lenders gaining some certainty over foreclosure processing issues, court decisions and regulations impacting the default process. He also points to the $25 billion mortgage servicing settlement that financial firms reached with state attorneys general over robo-signing and foreclosure issues.
On the surface, filings are still 19% below year ago levels, but the year ago level was artificially low just after the “robo-signing” scandal at the end of 2010.
“It’s a bit surprising that we are seeing this increase in January before the settlement was even announced,” Blomquist said. “It may be that lenders were ramping up (foreclosure activity) with the expectation of the settlement happening.”
RealtyTrac reports foreclosure filings rise 3% in January [Housingwire]
Posted by Jonathan J. Miller -Monday, February 13, 2012, 6:00 AM
There was a 21.2% decline in listing inventory from December 2010 to December 2011.
Relying on typical housing market scenarios and reasonable logic, a decline in listing inventory nearly always meant a tightening market was developing – fewer houses coming on line matched against steady demand meant housing prices were more likely to stabilize or rise.
Declining inventory is the variable in the housing equation that usually makes conditions improve. During the mid-decade housing boom, falling inventory was caused by the insatiable demand by buyers – product could not get out to the market fastest enough. Listing inventory was simply “worked off” by (artificially) inflated demand. Listing discounts approached zero, days on market fell to record lows and prices rose rapidly.
Old scenario: Declining Listing Inventory = declining housing prices ease their decline, prices stabilize or prices rise.
However over the last year, listing inventory fell sharply in many markets yet sales were generally anemic or showing nominal increases. In the NAR numbers, non-seasonally adjusted sales were up 1.4% year over year (using NSA since inventory is also NSA) yet inventory was down 21.2%. Inventory was clearly not declining because sales were overpowering the amount of listing inventory that was available.
Then why is inventory declining?
The answer to this question was not considered in the recent prediction of a market bottom.
New scenario: Declining Listing Inventory = fall in seller confidence and the sharp decline in distressed inventory entering the market.
Total housing inventory at the end of December dropped 9.2 percent to 2.38 million existing homes available for sale, which represents a 6.2-month supply2 at the current sales pace, down from a 7.2-month supply in November.
“The inventory supply suggests many markets will see prices stabilize or grow moderately in the near future,” Yun said. – National Association of Realtors
We are seeing unusual declines in many markets I keep tabs on such as:
Admittedly I am cherry picking some of the cities that are posting huge declines in inventory. However the problem I find in all of these markets, is that sales are only increasing a few percentage points. Not nearly enough to explain the rapid decline.
The drops are being touted as a good sign that housing is getting back on its feet. I’m not so sure.
I think the sharp drop in many US housing markets (and this has been happening for much of 2011) has to do with three key reasons:
- A large swath of foreclosure volume was artificially delayed.
- Seller confidence has waned after the pounding it took last fall.
- Low interest rates extended by the Fed for the next two years have removed any sense of urgency.
Declining foreclosure volume is one of the key reason inventory levels are dropping. The 1/3 decline in foreclosure volume in 2011 has resulted in a sharp drop in foreclosure inventory resulting in a sharp drop in total inventory. Distressed sales have been running at about 30% of total sales nationally for a few years but fell to about 20% in 2011. With a 2 million more homes expected to go into foreclosure over the next 2 years, a year long internal review of procedure after the 2010 “robo-signing” scandal and the 50 State AG settlement with the largest services/banks, distressed inventory is expected to rise sharply over the next several years.
Weak seller confidence is causing property not to be released into the market unless the need to sell is not optional. The 2011 home seller and buyer was bashed with the debt ceiling debate, the S&P downgrade of US debt, 400 point daily swings in the financial markets, the European debt crisis, the AG/Service settlement drama and the political stalemate on housing policy in Washington. What do people do when faced with the unknown? They sit and wait. Buyers had a lot more incentive to act with falling mortgage rates to record levels but mortgage underwriting grew tighter over the year as well.
The extension of the low interest rate policy by the Fed through the end of 2014 has obliterated any sense of urgency by sellers. I am getting a lot of feedback from real estate professionals about this as well as seeing it within my own appraisal practice. There is a lot going on the world right now and the action by the Fed suggested that they weren’t particularly encouraged by the economy. To many this may seem as an incentive for sellers to get going and sell. But many of those sellers have to buy.
The drop in inventory as a phenomenon may or may not pass quickly but one thing is clear – weird changes in market behavior happen for a reason – I don’t see declining inventory as a particular sign of strength in the housing market.
Posted by Jonathan J. Miller -Thursday, January 12, 2012, 6:30 AM
There is a lot of great data in RealtyTrac’s Year-End 2011 U.S. Foreclosure Market Report but the key is this:
“Foreclosures were in full delay mode in 2011, resulting in a dramatic drop in foreclosure activity for the year,” said Brandon Moore, chief executive officer of RealtyTrac. “The lack of clarity regarding many of the documentation and legal issues plaguing the foreclosure industry means that we are continuing to see a highly dysfunctional foreclosure process that is inefficiently dealing with delinquent mortgages — particularly in states with a judicial foreclosure process.
“There were strong signs in the second half of 2011 that lenders are finally beginning to push through some of the delayed foreclosures in select local markets. We expect that trend to continue this year, boosting foreclosure activity for 2012 higher than it was in 2011, though still below the peak of 2010.”
All the prognostications about declining foreclosures as some sort of sign of strength in a particular housing market were simply myopic. This announcement isn’t “new” news – its more about confirmation that more volume is coming.
Gotta love New York State – if there is one way to prolong the housing downturn, keep credit tight and depress prices, it’s government intervention to slow the process down:
The average foreclosure process in New York has increased 37 percent during the same time period, and New York properties foreclosed in the fourth quarter took an average of 1,019 days to complete the foreclosure process — the longest of any state.
Posted by Jonathan J. Miller -Wednesday, June 30, 2010, 12:01 AM
[click to open report]
RealtyTrac introduced its new U.S. Foreclosure Sales Report, covering the first quarter of 2010. It’s got a wealth of statistics to pour through:
“First time homebuyers and investors continue to buy foreclosure properties in large numbers, and at substantial discounts,” said James J. Saccacio, chief executive officer of RealtyTrac. “As lenders have begun repossessing homes at record levels over the first half of 2010, it will be interesting to watch how they will manage the inventory levels of distressed properties on the market in order to prevent more dramatic price deterioration.”
- Average sales price in some stage of foreclosure was nearly 27 percent below the average sales price of properties not in the foreclosure process.
- Foreclosure sales increase 2,500 percent from 2005 to 2009
- A total of 232,959 U.S. properties in some stage of foreclosure
- Foreclosure sales accounted for 29 percent of all sales in 2009, up from 23 percent in 2008 and up from 6 percent in 2007
- Ohio, Kentucky, Illinois post highest foreclosure discounts (39%)
- Foreclosure sales accounted for 64 percent of all sales in Nevada, the highest in the nation
It doesn’t look very good for housing. However, the sooner these properties work their way through the system, the sooner we’ll see a housing market recovery.
1Q 2010/U.S. Foreclosure Sales Report [RealtyTrac]