Tuesday, July 22, 2008
Dataquick's quarterly foreclosure report was released today. I may have more to write about it later but here is an updated chart of the likelihood of being foreclosed on once a notice of default is filed.
Clearly the foreclosure issue is getting worse. L.A. County started down the foreclosure path a bit later than some of the rest of the state so it will peak later as well. I think some parts of the state are near their peak of default activity. According to my calculations Q4 of 2008 should have more homes foreclosed in the state than sold. But there are some safe harbor provisions in the new housing bill that may allow servicers to make wholesale modifications without exposing themselves to investor lawsuits. This may make the foreclosure issue subside faster if homeowners start getting handed sweetheart deals by servicers. I think it is a small possibility but one that has to be taken into account.
A signature Sacramento program that has helped almost 300,000 lower-income people nationally buy homes in the past decade – while stirring controversy for years – is likely to be shut down this week, Nehemiah Corp. of America officials acknowledged Monday.
The nonprofit giant believes Congress and President Bush will ban its decade-old down-payment assistance "gift" program within days as part of a larger housing bill, Nehemiah President and Chief Executive Officer Scott Syphax said Monday.
The DPA programs were a source of high defaults for the FHA and represented one of the few paths to 100% LTV financing left in the marketplace. This represents another incremental tightening of credit guidelines that will certainly slow sales at the bottom end of the market but these sales shouldn't have been made to begin with.
Monday, July 21, 2008
Saturday, July 19, 2008
Homes sales look to be slightly up to around 682, 2-3% MoM and flat to down 1% from the year before. The median should come in around $440,000 which would be down 2% MoM and down around 32% (!) from $655,000 a year before. Pending sales are up slightly so next month should see sales around 700 if my estimates are correct.
Condo sales look to be up around 29% MoM and down 11% YoY. The median should come in around $310,000 which would be up 3% MoM and down 22% YoY. Pendings are flat so next month sales should be close to this months estimated 217 sales.
We are in a bifurcated market. There are the motivated sellers and then there is everyone else. The banks are clearing inventory but not keeping up with the number of homes they are taking back. Inventory is falling a bit and we are starting to go negative YoY. This a function of unrealistic sellers giving up and more homes being foreclosed and waiting around to be processed and put on the market.
As the summer progresses it will be interest to see the course the banks take. If they hold the line on prices during winter, inventory builds. If they try to maintain volume during a traditionally slow time, prices will fall dramatically. Which path they choose to go will set up next years selling season. We could have much better sales year next year if prices go into the selling season significantly lower. But if the banks hold the line sales will probably only have a small rebound as the standoff continues.
Thursday, July 17, 2008
Sunday, July 13, 2008
It will be interesting to see if these lowered starting bids get more closed sales by the lenders. Many auction bids are not accepted since the reserve prices aren't met and the lender attempts to sell the home again through other means.
The Los Angeles County auction is set for August 23, 2008 at the LA Convention Center.
The Ventura County auction is set for August 26, 2008 at the Oxnard Performing Arts Center.
Thursday, July 10, 2008
The exchange rate on 50,000,000 Zimbabwe dollars comes out to about a third of a penny. But that math is a couple hours old, inflation there is running at 11% an HOUR..
Wednesday, July 9, 2008
"While sales activity normally picks up going into the summer, June’s increases far exceeded the typical seasonal surge, especially in the condo market. It also exceeded a smaller surge two months ago before sales subsided again.
There were 1,254 condo units sold in June, up 115 percent from May. That was the largest number of condos sold in one month since July 2007, though sales were still off 4 percent year over year, according to data provided to the Business Journal by Melville, N.Y.-based HomeData Corp.
One reason for the surge: price. The median price of a condo that changed hands in Los Angeles County fell 12 percent year over year to $386,000.
Meanwhile, there were 3,332 new and existing homes sold in June, up 30 percent from May, but down 28 percent from year-ago levels. The median price fell to $429,000 – its lowest level since October 2004."
To give this "surge" in sales some perspective, here is May 2008 Condo chart for the SFV valley:
As you can see a doubling of sales would still put sales in a historically weak position. The spring selling season is clearly a bust for Condos and only big price cuts can even begin to start to absorb the significant supply coming on line in the Valley. Year over Year comparisons remove seasonality from the equation and we see that YoY comparisons are very weak for home sales. It will be interesting to see how the SFV fairs, it has been doing better than other parts of L.A. County because it started falling earlier and faster than other regions. May's pending sales were off a bit for homes and up for condos so we will see at the end of next week how the official SRAR stats compare. For sales stats that combine condo and home sales you should see a big drop in median prices as the ratio of home to condo sales normalizes, with the cheaper condos dropping the median price (In other words, the low median prices reported lately have been under reporting the severity of the decline because the number of houses selling was greater relative to condos). One other report to keep an eye out for is Dataquicks foreclosure reports for the 2nd Quarter, it should be out in a couple weeks as well.
Tuesday, July 1, 2008
The term “significant decline” is not defined within the regulation itself. However, theFederal Reserve Board’s Official Staff Interpretations (Official Interpretations) to this provision of Regulation Z includes an example indicating that, while a “significant decline” will vary according to the circumstances, such a decline has occurred if the unencumbered equity is reduced by 50 percent.
There is anecdotal evidence of lenders pulling HELOCs even on residence with low LTVs because they are trying to preserve liquidity and reduce risk. This guidance will help stop the lenders going overboard at the same time I think it gives them some protection from lawsuits as the number of affected people not falling within their parameters (and thus having a strong claim) is relatively small.