Ventura County Trustee Sales for June 2009

Here are the trustee sales graphs from January 2007 through June 2009. Investor activity is still significant and I know of a couple organized groups working the trustee sales pretty hard. There is at the very least a temporary lull in inventory on the low end that investors are rushing to fill. The tax credit, sub-5% interest rates (I don't think the sub-5% interest rate effect on demand can be overstated) and seasonality have created tremendous demand. Supply is being constrained by the now expired moratoriums and the expectations of many homeowners who would normally short sale thinking they will get a loan modification. With the increase in REO inventory and the servicers working through the loan mod requests to accept or deny borrowers the inventory situation should improve going into the second half of the year.

Los Angeles Trustee sales for June 2009

Here are the trustee sales graphs for Los Angeles County from January 2007 through June 2009. Investor activity is lighter in Los Angeles County relative to the other counties I've featured suggesting that either there are more undesirable areas or that investor groups haven't organized to the scale necessary to match the increased level of sales. Sales increased dramatically month over month and even a small increase in July will put us at the record levels of last summer.

Updated San Diego Trustee Sales for June 2009

Here are the total trustee sales for San Diego from January 2007 to June 2009. Clearly the investors are jumping in right now and at the very least thinking this is a good time to make some money. If we get another solid month to month increase in July we will back to levels not seen since last summer.

Orange County Trustee sales for June 2009

Here are the trustee sales for Orange County from January 2007 through June 2009. There is clearly a high level of investor activity in Orange County. With almost thirty percent of trustee sales going back to investor over a sustained period of time. Some of that in my opinion has to be more speculation then buying on fundamentals. Competition at the trustee sales looks to be very intense.

San Diego Trustee Sales June 2009

Since everyone is watching trustee sales so much I decided to generate the San Diego version of the trustee sale chart that I generate from ForeclosureRadar. I added in a new chart showing the percentage of 3rd party sales relative to total sales for the month. Note June sales are through Friday the 26th.

People are looking at the market and wondering if the bottom is in, at least on the low end. We have a tax credit, low inventory on the low end, around 5% interest rates and high use of FHA borrowers. I think the a lot of people "bum rushed" the market at the same time causing this phenomenon. The investors see the low inventory and new higher supply of trustee sales and see at the very least a temporary opportunity to get out ahead of the market and make some money. While I do feel this is an interim bounce on the way to the bottom I think watching what investors across the state are doing will be a leading indicator for what the market is doing. When/If prices start falling (on the low end) and/or supply builds again the investor activity should moderate as they will be forced to shy away from some of the more marginal deals that I feel they are buying today.

Note: I have added a foreclosure research link to the site, see here.

Ventura County February 2009 Loan To Value chart

Here is the February 2009 Loan To Value chart for Ventura County. If you click and enlarge the chart it basically shows how much people are putting down at different price points. A dot at 80.0 and $300,000 means that a borrower put 20% down on a $300,000 place. This gives us a feel for how people (down payments, monthly payments and loan type) are getting into the market and where (sale price) they are getting into the market. For jumbo conforming it is getting very difficult to get PMI. So FHA is the only option for loans with less than 20% down.

For conforming loans it is getting difficult to get PMI above 90% LTV and this is where we see the rampant FHA activity. The Jumbo conforming loan limit was about to drop from 729k to 625k and many lenders were phasing it out by November. The jumbo conforming limit is back to 729k this year but its effect was marginal on the market to begin with.

For people in the market right now if you go to the left hand side and look and find around the price at which you are thinking of buying and then you can go to the right and see what your competition has done as far as down payments and loan types.

The FHA loans at the higher price ranges are, in my opinion, very risky. FHA used to be for low income people and were underwritten with lower DTI ratios. Now they are used somewhat by high income people at higher income ratios, their prospect of higher income is low and lower income is high. I think this will affect the higher end move up markets as the people who rushed to buy have little to no equity for many years. I think this is true of FHA used in massive quantities in the market like we have now (which was 38% of the So Cal market in February according to Dataquick). With little down it will take that much longer to buildup significant equity and long term move up and relocation transactions in the market should stay low.

Note: I have added a foreclosure research link to the site, see here.

Orange County Trustee Sales Graph

Since Calculated Risk and Mathew Padilla were talking about Orange County Trustee Sales I generated this chart to fruther discussion. It appears investor activity is much greater in OC versus Los Angeles or Ventura. Note sales for June 2009 are through last Friday.

Note: I have added a foreclosure research link to the site, see here.

Bill to put a 18 month moratorium on HVCC introduced.

Representatives Childers and Miller have introduced H.R. 3044 which imposes an 18-month moratorium on the Home Valuation Code of Conduct.

The NAMB has issued a press release in support, I haven't seen an official NAR press release yet. But here are 2 other steps the NAR is taking to get HVCC set aside (this email is confirmed but this is the only public link I could find to it):

On Monday, June 29th, I will be in New York to meet with the Deputy Attorney General and his staff who worked directly on the Home Valuation Code of Conduct. I plan to share our concerns, as well as your stories, and ask for their assistance in resolving any problems related to the HVCC.

On Tuesday, June 30th, I will travel to Washington, D.C., to meet with the Director of the Federal Housing Finance Agency to discuss ways we can work with Fannie Mae, Freddie Mac and lenders to ensure that appraisals are accurate.

Looks like the earlier rumor was true. This is all from that playbook. This is really about defining what an "accurate appraisal" is, it is different things to different people. And the NAR wants to make sure any appraisal number is as high as possible so that the fewest deals are affected by appraisal issues.

Weekly Active/Pending counts SFV & Ventura - 06/27/09

Here are the weekly inventory and pending counts for Ventura County and the San Fernando Valley. For the legend Single Family Homes is abbreviated SFH, Ventura County is abbreviated VC and San Fernando Valley is abbreviated SFV. For readers who might not know, REO are bank owned foreclosures and short sales are owners hoping to sell the home for less than what is owed on the mortgage balance.

Update: Please see the home page for the latest graphs, I am reverting earlier weeks to text to maintain site speed.

San Fernando Valley:
Single Family Homes
Active - Total 2077
Active - Short sale 645
Active - REO 183
Backup - Total 679
Backup - Short sale 382
Backup - REO 42
Pending - Total 1638
Pending - Short sale 694
Pending - REO 448
Distressed active / Total active = 39.9%
Distressed pending / Total Pending = 69.7%

Condo
Active - Total 689
Active - Short sale 361
Active - REO 59
Backup - Total 257
Backup - Short sale 180
Backup - REO 18
Pending - Total 499
Pending - Short sale 230
Pending - REO 152
Distressed active / Total active = 61.0%
Distressed pending / Total Pending = 76.6%

Ventura County:
Single Family Homes
Active - Total 1432
Active - Short sale 184
Active - REO 94
Contingent - Total 990
Contingent - Short sale 670
Contingent - REO 56
Pending - Total 734
Pending - Short sale 199
Pending - REO 217
Distressed active / Total active = 19.4%
Distressed pending / Total Pending = 56.7%
Release from Showing 307

Condo
Active - Total 449
Active - Short sale 87
Active - REO 35
Contingent - Total 397
Contingent - Short sale 299
Contingent - REO 21
Pending - Total 239
Pending - Short sale 76
Pending - REO 88
Distressed active / Total active = 27.2%
Distressed pending / Total Pending = 68.6%
Release from Showing 69

Unemployment and loan modifications don't mix.

Turns out it is kind of hard to modify loans when there is no income. Those pesky NPV tests keep coming back that it is better to foreclose than modify. From the Wall Street Journal (emphasis added):

Rising unemployment is complicating the Obama administration's effort to reduce foreclosures and stabilize the housing market.

The first wave of mortgage delinquencies was sparked by borrowers who took out subprime mortgages and other risky loans that became unaffordable, causing them to fall behind on their monthly payments. But the current wave is increasingly driven by unemployment or underemployment, economists and housing counselors say.

The Obama foreclosure-prevention plan was "built around the subprime crisis model, not the unemployment crisis model," said Michael van Zalingen, director of homeownership services for the nonprofit Neighborhood Housing Services of Chicago.

But many borrowers don't have sufficient income to qualify for a loan modification under the plan. Mr. van Zalingen said roughly 45% of the more than 900 borrowers who sought help at two recent counseling events would fall into that category even if their interest rate were dropped to 2% and their loan term were extended to 40 years.

Many of those unqualified borrowers suffered job losses or a reduction in income, Mr. van Zalingen said. Roughly 27% of borrowers who called the mortgage industry's national "Hope Hotline" in the second quarter of 2009 cited unemployment as the primary or secondary reason for their mortgage problems, up from 9.7% in the second quarter of 2008.

The article goes on to talk about various suggested remedies to the issue. Investors in mortgages are increasingly looking like unsecured creditors. There isn't much point of a asset backed security if you can't ever get your hands on the asset when the other party isn't performing. At what point do the investors get a say?

Some charts from the latest CAR forecast

Here is the California Association REALTORS® forecast as of 6/12/09 (basically unchanged):

Here are the number of buyers with zero downpayment:

Here is the stratification of unsold inventory:

Why is Barney Frank underwriting loans?

Before I even get to why I ask the question in the blog title, I will give the answer it is because he is completely in the pocket of the housing industry. During the boom he kept heavily pushing the GSEs to underwrite more loans to marginal buyers. Once the GSEs blew up he held hearings to ask why they gave loans to marginal buyers.. Unfortunately nobody ever bothered to answer "Because you asked us to do so".

Back to the matter at hand from the WSJ (emphasis added), Changes Urged to Rules on Condo Loans:

Two Democratic lawmakers are calling on Fannie Mae and Freddie Mac to relax recently tightened standards for mortgages on new condominiums, saying they could threaten the viability of some developments and slow the housing-market recovery.

In March, Fannie Mae said it would no longer guarantee mortgages on condos in buildings where fewer than 70% of the units have been sold, up from 51%...which the firm sees as signals that a building could run into financial trouble..

In a letter to the chief executives of Fannie and Freddie, Reps. Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, and Anthony Weiner (D., N.Y.) warned that the 70% sales threshold "may be too onerous" and could lead condo buyers to shun new developments. The legislators asked the companies to "make appropriate adjustments" to their underwriting standards for condos.

Fannie and Freddie made the adjustments based on their studying defaulting loans and the risk factors that led to the loss. The lawmakers don't care about that, they just want to please the special interest at the expense of the taxpayers. It isn't a coincidence that from the earlier post about the NAR trying to shut down HVCC that they would be turning to Barney Frank.

San Fernando Valley May 2009 sales report

San Fernando Valley Single Family Home sales came in at 708 which is up 2.46% MoM and 5.83% YoY. Median prices came in at $350,000 which is down 1.41% MoM and down 22.22 YoY. This was the fourth worst May on record just barely beating out May 1992 for SFH sales. Sales are not "brisk", sales are very low, Inventory of the price ranges that are selling (Low end REOs) are low as well. The current market is having a supply issue in the affordable ranges. Sales will continue to be low as long as this is the case.

Condo sales came in at 226 which is up 7.62% MoM and up 34.52% YoY. Median price came in at $185,000 which is down 16.97% MoM and down 38.13% YoY. Condo sales are still historically weak.

Rumor: NAR starts offensive against HVCC

Below is a rumored email laying out the NAR offensive against the HVCC. I believe they will ultimately be successful getting a moratorium in place and then neuter it to the level of being ineffectual in protecting banks by ensuring appraisers aren't influenced by anyone involved in the transaction. In a world of low down payments, marginal buyers and low interest rates it is now more important than ever to have conservative appraisals. This protection will be eliminated by special interest groups worried about their wallets.

-------------------------------------------------------------------
TO: State Association Executive Officers
State Association Presidents
FROM: NAR Government Affairs
DATE: 19 June 2009
RE: Fly-In Head's Up

Please note this notice is going to all state executive officers and state presidents. We will be sending Fly-In details on Monday June 22, 2009 to the states who have Members of Congress and/or United States Senators on the House Financial Services Committee or Senate Banking Committee. (list of states at end of memo)

There is growing concern in the real estate industry over the implementation of the Home Valuation Code of Conduct (HVCC) and its effect on the use of appraisal management companies (AMCs) by lenders.

NAR is taking the following actions: (Target dates in bold)

1. NAR is scheduling meetings with the Director of Federal Housing Finance Agency, Jim Lockhart to raise concerns about implementation of the HVCC and problems with AMCs and ask for an immediate 18 month moratorium. Director Lockhart is the conservator over Fannie and Freddie who entered the consent order with the NY Attorney General. ( June 22, 23, 24, or 25th)

2. Government Affairs will conduct a fly in the week of June 22. Two members from each Association (State AE/State President or FPC as appropriate) to meet with members/staff of the House and Senate Banking/Financial Services Committee. The ask will be to cosponsor the bill (item 3) and to support an 18 month moratorium.

3. Our legislative team will work on getting a bill introduced in Congress asking for a 18 month moratorium. (week of June 22)

4. We will ask the Chair and Ranking Members of the House and Senate Banking [ Reps Frank and Bachus/ Senators Dodd and Shelby] Committees to write Director Lockhart asking him to grant a 18 month moratorium (week of June 22)

5. We will try and get an 18 month moratorium attached to an immediate pending appropriation bill or other similar fast track bill. (June)

6. Staff will talk to the American Bankers Association who heretofore is fine with the AMC system to see if we can negotiate support.(June 19)

NAR will engage a coalition of Appraisal Institute, MBA, Home Builders and other appropriate trade groups.

7. NAR Research is conducting a survey so we have concrete data information to bring to the regulators and the NY Attorney General’s office . The survey will also be run through the State Association. EHS will be released next week and the appraisal issue will be mentioned front and center in NAR's release. Survey release June 22

8. NAR is scheduling a meeting with NYS Attorney General Andrew Cuomo and representatives of NYSAR. (June 29. 30)

9. NAR will conduct a Call For Action if we do not get a moratorium in the next week to 10 days

NAR is aware of multiple petitions calling for an end to the HVCC. NAR is taking a more tempered and thoughtful approach of asking for a moratorium during this trouble housing economy.

States with Members of Congress and/or United States Senators on the House Financial Services Committee or Senate Banking Committee: AL, CA, CO, CT, DE, FL, GA, HI, ID, IL, IN, KS, KY, LA, MA, MI, MN, MO, MS, MT, NC, NE, NH, NJ, NY, OH, OK,OR
PA, RI, SC, SD, TN,TX, UT, VA, WI, WV

-------------------------------------------------------------------

UCSB California Economic Forecast - June 2009

Bill Watkins of the UCSB Economic Forecast Project has a presentation up about his prediction for the California economy and the City of Ventura as well. I will post a couple charts from his forecast and I suggest you read through the rest of his presentation as well. The presentation can be found here. You may click to enlarge any of the following charts.

Here is Bills prediction for GDP for California:

Here is his prediction on the Unemployment rate for California:

Here is the forecast for retail sales in California:

This isn't a forecast, this next chart shows the net out migration of people (more people moving to other states than coming here from other states) and international migration (immigration):

I understand that Bill will soon be moving to a new school. I hope we will still have access to his excellent analysis and I wish him the best of luck.

Weekly Active/Pending counts SFV & Ventura - 06/20/09

Here are the weekly inventory and pending counts for Ventura County and the San Fernando Valley. For the legend Single Family Homes is abbreviated SFH, Ventura County is abbreviated VC and San Fernando Valley is abbreviated SFV. For readers who might not know, REO are bank owned foreclosures and short sales are owners hoping to sell the home for less than what is owed on the mortgage balance.

Update: Please see the home page for the latest graphs, I am reverting earlier weeks to text to maintain site speed.

San Fernando Valley:
Single Family Homes
Active - Total 2116
Active - Short sale 676
Active - REO 189
Backup - Total 672
Backup - Short sale 363
Backup - REO 55
Pending - Total 1617
Pending - Short sale 677
Pending - REO 454
Distressed active / Total active = 40.9%
Distressed pending / Total Pending = 69.9%

Condo
Active - Total 719
Active - Short sale 379
Active - REO 64
Backup - Total 245
Backup - Short sale 170
Backup - REO 22
Pending - Total 515
Pending - Short sale 216
Pending - REO 171
Distressed active / Total active = 61.6%
Distressed pending / Total Pending = 75.1%

Ventura County:
Single Family Homes
Active - Total 1411
Active - Short sale 191
Active - REO 84
Contingent - Total 1010
Contingent - Short sale 674
Contingent - REO 63
Pending - Total 731
Pending - Short sale 195
Pending - REO 221
Distressed active / Total active = 19.5%
Distressed pending / Total Pending = 56.9%
Release from Showing 303

Condo
Active - Total 445
Active - Short sale 88
Active - REO 43
Contingent - Total 394
Contingent - Short sale 295
Contingent - REO 19
Pending - Total 242
Pending - Short sale 77
Pending - REO 84
Distressed active / Total active = 29.4.1%
Distressed pending / Total Pending = 66.5%
Release from Showing 68

Major servicers exempt from 90 day foreclosure delay

Here is the list of servicers exempt from the additional 90 day delay in foreclosure.

As expected this law will have little to no impact on the current foreclosure pipeline. Last years foreclosure moratorium was much drastic.


Note: I have added a foreclosure research link to the site, see here.

California Loan Modifications update

The Department of Corporations has required mortgage servicers to report their workout and foreclosure prevention effors. Recently the DoC released a report for Q1 - 2009 as to how to what progress (to them) was being made on the workout front. The good thing about this data is it is California specific, Hope Now is national.

Here are the Trustee Sales (Foreclosures) versus Total Workouts over each month:

(click to enlarge)

As you can see from the above charts foreclosures were greatly affected by the various foreclosure moratoriums starting in late July.

(click to enlarge)

Workout closed by type. This is the end result of the previous graphs Total Workouts line broken down by type. Account paid current means the account was brought back into good standing. Deed-in-lieu means the borrower surrendered the house and the lender voluntarily took it back without a foreclosure sale. Short sale means the borrower agreed to sell the house and the lender agreed to be paid back less than the full amount. Modification means an adjustment to the terms of the loan (see next graphic). Forebearance plan means the lender agrees to not accept payments for a few months and places the balance back onto the end of the loan to give the borrower some breathing room.

(click to enlarge)

The above graphic is the previous graphics "Modification" line broken down into its constituent parts. I used some abbreviations to save space:

• IR : Interest Rate - Current Interest Rate for the loan.
  
• SR : Start Rate or Initial Rate - Initial Interest Rate for the Loan
  
• RR : Reset Rate - Rate at which the loan will reset

One thing that jumps out that Reducing Principal Balance is the lowest line on the chart and effectively zero. If borrowers are expecting significant principal reductions they will be disapointed. It simply won't happen. A borrower looking to stay in a home must expect to pay off the balance in full. While modifications are increasing the borrowers are only getting adjustment in interest rates and amortization length. This still leaves underwater borrowers underwater and unable to move (outside of short sale or foreclosure) or expect to create equity when writing out the monthly mortgage payment. Note on the second graph that the only other upward trending line besides modifications is short sales. I expect this to be the growing part of the market moving forward.

"Demand for FHA Loans Is Overtaxing Agency"

From Bloomberg (emphasis added):

“FHA will be challenged to handle its expanded workload or new programs that require the agency to take on riskier loans than it historically has had in its portfolio,” Kenneth Donohue, the inspector general for the Housing and Urban Development Department, told lawmakers today. “The surge in FHA loans is likely to overtax the oversight resources of FHA, making careful and comprehensive lender monitoring difficult.”
...
The freeze in the mortgage markets has driven FHA’s market share to 63 percent this year, from 24 percent in the fiscal year ended Sept. 30
...
FHA has historically been most vulnerable to fraud and exploitation when loan volume is high, Donohue said. He said that Ginnie Mae, the government agency that insures mortgage bonds backed by FHA loans, is also at risk.
....
Donohue said the rise of mortgage fraud among FHA lenders has depleted
FHA’s mortgage insurance fund, which has fallen to $12.9 billion, or 2 percent
of all insured assets as of Sept. 30, from $21 billion, or 6.4 percent of assets
a year earlier.
...

I guess increasing underwriting standards, insurance premiums, oversight and down payment size would be too easy of an answer. Instead the taxpayers have to pay?

Ventura County May 2009 Home Sales

The May 2009 Ventura County home sales were announced by Dataquick today. Sales came in at 797 which was up 10.1% MoM and up 12.6% YoY. The median sale price came in at $355,000 which was up 4.4% MoM and down 18.4% YoY. The median price is heavily affected by the mix of homes selling and that accounts for much of the improvement though there has been some strength on the low end due to the lack of inventory.

These sales levels are quite anemic for Ventura County. Yes there is a depressed economy but there is a large pool of buyers (renters), 5% interest rates, low down payments mortgages (FHA) and a $8,000 tax credit. I think the lack of supply in the affordable ranges is keeping the lid on any sales recovery. The foreclosure moratoriums have restricted supply which has put a lid on effective demand. Now with foreclosures slowly ramping up when that new supply hits the market it should be absorbed quite well. The moratoriums were only prolonging the pain instead of letting the market clear. The state is looking for revenues to replace the lack of capital gains by investors, with heavy investor involvement in REOs and an increased supply of REOs coming on market they could reap so much needed revenue while dealing with the issue instead of just trying to hide the issue and hoping it would go away.

California Foreclosures for May 2009

ForeclosureRadar came out with their May 2009 Foreclosure report for California. While NOD are down slightly MoM, NTS are rapidly increasing with actual trustee sales showing a steady MoM increase as well. The implied level of future sales indicated by the NTS is quite high and even high than last summers peak. With various loan mod programs, increased political pressure and more incentives for short sales I am not sure we will reach the trustee sale peak again but the data is implying we should.

I thought this was the most interesting statistic from the report:

By the end of May we had a record 111,824 foreclosures scheduled for sale, yet just 15.9 percent were actually sold, versus 49.2 percent of scheduled foreclosures being sold a year earlier. Further, when sales peaked in July 2008 at levels 61 percent higher than those reached in May 2009, there were only 64,598 foreclosures scheduled for sale, 42.2 percent fewer than today.

That is what I consider shadow inventory. I don't see huge numbers of REOs (homes that have already been taken back by the bank) sitting on the sidelines being held off market. But I do see massive numbers of homes able to be taken back but banks repeatedly holding off. It is still an open question whether the banks ultimately take the homes back or not. The banks are slow to ramp up the trustee sales and homeowners in a bind are hoping for a bailout instead of dealing with their reality. IF the dam breaks it should be dramatic but that is a huge IF.

Note: I have added a foreclosure research link to the site, see here.

Foreclosure update for Los Angeles and Ventura County Mid-June 2009

Los Angeles County:

Ventura County:

Source: ForeclosureRadar

Here is the trustee sale update for Ventura and Los Angeles County for sales through June 15th, 2009. Third party sales continue their heavy pace as investors continue to exploit the lack of inventory on the market. Los Angeles county is on pace for a level of foreclosures not seen since last September. Ventura is much slower ramping up. I think sales might not end up as strong as the second half of the month as the first half due to volume of scheduled sales. I think sales will probably only increase 10%-15% MoM. The market could sure use the supply.

SacBee: New foreclosure rules to start Monday

From the Sacramento Bee regarding the additional 90 days added to the foreclosure process rule that goes into effect Monday (emphasis added):

Backers say it will make lenders try harder to keep borrowers in homes. Starting Monday, loan servicers must prove to the state they have comprehensive loan modification programs in place – or be denied rights to foreclose on their own schedules.
"You have voluntary programs that they don't have to do," said Assemblyman Ted Lieu, a Torrance Democrat who was the author of the bill. "This creates an enforcement mechanism to force them to do it. The hammer is the 90-day foreclosure moratorium, which they all hate."
...
"The vast majority of large servicers should have no trouble complying. They have already complied with similar requirements at the federal level," said Dustin Hobbs, spokesman for the California Mortgage Bankers Association.
...
In summary, here's what will happen starting Monday:
• Lenders will submit applications to the state outlining their loan modification programs. That gives them a 30-day exemption from a moratorium.
• If the state OKs a lender's program, the firm is permanently exempt from the 90-day delay on foreclosures.
• If the state rejects the program as inadequate, a lender has 30 days to upgrade it and be reconsidered.

It is "voluntary" but of course you get tremendously punished if you don't comply. I don't think this will have a big effect on the market but it is infuriating the amount of political interference that is happening to stop the bubble from popping when there was none to keep it from inflating in the first place. The politicians are missing the fact that this low interest rate sweet spot is only temporary. Higher rates will come in the future at the same point they have kicked the can down the road. This is not a bad market to liquidate supply and to clear the problem.

Cal State Fullerton: So. Cal. Leading Economic Indicators

A couple of charts from Southern California Leading Economic Indicator report from Institute for Economic and Environmental Studies, California State University Fullerton:



Just in case anyone was thinking this would be over anytime soon..

Weekly Active/Pending counts SFV & Ventura - 06/13/09

Here are the weekly inventory and pending counts for Ventura County and the San Fernando Valley. For the legend Single Family Homes is abbreviated SFH, Ventura County is abbreviated VC and San Fernando Valley is abbreviated SFV. For readers who might not know, REO are bank owned foreclosures and short sales are owners hoping to sell the home for less than what is owed on the mortgage balance.

Update: Please see the home page for the latest graphs, I am reverting earlier weeks to text to maintain site speed.

San Fernando Valley:
Single Family Homes
Active - Total 2143
Active - Short sale 693
Active - REO 197
Backup - Total 689
Backup - Short sale 353
Backup - REO 59
Pending - Total 1575
Pending - Short sale 665
Pending - REO 455
Distressed active / Total active = 41.5%
Distressed pending / Total Pending = 71.1%

Condo
Active - Total 738
Active - Short sale 398
Active - REO 61
Backup - Total 248
Backup - Short sale 173
Backup - REO 22
Pending - Total 513
Pending - Short sale 201
Pending - REO 177
Distressed active / Total active = 62.2%
Distressed pending / Total Pending = 73.7%

Ventura County:
Single Family Homes
Active - Total 1393
Active - Short sale 191
Active - REO 81
Contingent - Total 998
Contingent - Short sale 663
Contingent - REO 68
Pending - Total 745
Pending - Short sale 196
Pending - REO 219
Distressed active / Total active = 19.5%
Distressed pending / Total Pending = 55.7%
Release from Showing 311

Condo
Active - Total 461
Active - Short sale 101
Active - REO 47
Contingent - Total 371
Contingent - Short sale 275
Contingent - REO 21
Pending - Total 240
Pending - Short sale 75
Pending - REO 85
Distressed active / Total active = 32.1%
Distressed pending / Total Pending = 66.7%
Release from Showing 68

Interest rate pressure on the market increasing.

The WSJ had a story about interest rates today with the following comment:

"Mortgage rates at these levels will hobble the [housing] recovery, and it was just the beginning of the recovery," says Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley.

While I still have a hard time wrapping my head around 5.75% interest rates as "high" it is clear that the sub-5% rates of the last couple of months were definitely a driver of increased buying activity. What is unknown is the effects on supply. Loan modifications are based off of prevailing interest rates, people who can refinance may stay instead of short sale, etc. There is a massive pipeline (application already taken, some but not all locked) of 5% and below interest rate refinances that will simply go away if rates continue at this level. Lenders give priority to purchase deals and we have seen the climbing numbers of homes under contingent contract on the weekly inventory reports here. Many of those, especially the short sales, will not be able to continue without either a concession from the seller on price. Over the short term though rising rates put pressure on buyers with rate locks to make a decision.

I think a lot of people are holding their breath right now hoping this is just a short term issue. But investors are showing more of an appetite for risk and are shying away from treasuries and moving into corporate bonds & equities and that pressure mortgage rates. Also as rates rise the prepayment speeds on portfolios fall and investors are left with longer duration portfolios. Many will try to re-balance the portfolios duration by selling off the longer duration mortgages adding to the pressure on mortgage rates. Mortgage rates could fall if the Fed steps up some of their purchases or more bad economic news destroys investors risk appetite.

I recommend following the Mortgage Rates Blog if you would like to see what is going on in the mortgage market on a daily basis.

Ventura County Demand versus Inventory - June 2009

(click to enlarge)

This is June 2009 Demand versus Inventory for Ventura County. I have broke down demand into 3 separate parts, Completed sales, properties under some sort of contingent contract and properties that have cleared contingencies and are waiting to close escrow. With the spike in interest rates the large number of contingent properties are in danger of falling out if loan locks are lost and rates don't adjust back down. You can see that the $650,000+ market is still in much denial and the low end has a tremendous amount of activity. The story of the market going into summer is how much supply can be brought in on the low end and the pull through to closing on the large number of contingent contracts.

An amazing statistic

From the USA Today:

The recession is driving the safety net of government benefits to a historic high, as one of every six dollars of Americans' income is now coming in the form of a federal or state check or voucher.

The activity of the last week.

Just a quick note of what I think has been happening this last week. There has been a surge of closing and properties going under contract. I think both of these things are driven by the surge in interest rates that happened since May 27th ("Black Wednesday" some are calling it). Lenders with purchase transactions with rate locks expiring soon are pushing them through to prevent the deal from blowing up. Borrowers who were shopping with rate locks or just seeing rates spiking have rushed into contracts to buy before rates going any higher. Assuming rates don't recover with all the contingent contracts in the pipeline I would expect some large fallout due to locks expiring before conditions can be cleared, especially on short sale transaction.

The market is highly irrational now, even bubble-icious in some areas. Low inventory due to foreclosure moratoriums and loan modifications are keeping new supply from coming on the market and a tax credit, ultra-low rates (sub 5%) and loose FHA underwriting are driving demand.

While I believe this is just a short term situation due to the factors listed above, I could be wrong.

If you would like to follow rates I recommend here and the related blog here.

Weekly Active/Pending counts SFV & Ventura - 06/06/09

Here are the weekly inventory and pending counts for Ventura County and the San Fernando Valley. For the legend Single Family Homes is abbreviated SFH, Ventura County is abbreviated VC and San Fernando Valley is abbreviated SFV. For readers who might not know, REO are bank owned foreclosures and short sales are owners hoping to sell the home for less than what is owed on the mortgage balance.

Update: Please see the home page for the latest graphs, I am reverting earlier weeks to text to maintain site speed.

San Fernando Valley:
Single Family Homes
Active - Total 2193
Active - Short sale 735
Active - REO 204
Backup - Total 673
Backup - Short sale 343
Backup - REO 66
Pending - Total 1552
Pending - Short sale 638
Pending - REO 456
Distressed active / Total active = 42.8%
Distressed pending / Total Pending = 70.5%

Condo
Active - Total 753
Active - Short sale 397
Active - REO 76
Backup - Total 229
Backup - Short sale 156
Backup - REO 21
Pending - Total 475
Pending - Short sale 190
Pending - REO 165
Distressed active / Total active = 62.8%
Distressed pending / Total Pending = 74.7%

Ventura County:
Single Family Homes
Active - Total 1409
Active - Short sale 197
Active - REO 78
Contingent - Total 991
Contingent - Short sale 652
Contingent - REO 73
Pending - Total 726
Pending - Short sale 192
Pending - REO 227
Distressed active / Total active = 19.5%
Distressed pending / Total Pending = 57.7%
Release from Showing 306

Condo
Active - Total 457
Active - Short sale 101
Active - REO 46
Contingent - Total 362
Contingent - Short sale 270
Contingent - REO 24
Pending - Total 238
Pending - Short sale 69
Pending - REO 86
Distressed active / Total active = 32.2%
Distressed pending / Total Pending = 65.1%
Release from Showing 72

More on the FHA monetizing the tax credit...

Apparently you can use the tax credit for downpayment...

The new program lets home buyers apply the tax-credit advance against the FHA's 3.5% down payment requirement only if the loan is handled through a state housing-finance agency; otherwise the tax advance may only be used to cover closing costs, to increase the down payment, or to buy down the mortgage's interest rate. The FHA already allows down payment assistance from family, employers, and governmental agencies, but generally bars it from sellers, mortgage writers, or others who would benefit financially from the transaction.

How will this affect FHA defaults? Businessweek has this tidbit (emphasis added):

First, the source of a downpayment can make a big difference. For FHA-backed mortgages made in fiscal 2000, the foreclosure rate was 5.95% when homebuyers made the downpayment -- but 7.9% when it came from the buyer's family and 15% when it came, indirectly, from the seller in a practice that is now banned. When downpayment assistance came from a government agency -- eg, a state housing finance agency -- the default rate was 13.1%, more than double the rate when homebuyers coughed up the downpayment themselves.

Unlike normal times where government agencies have a limited budget which means few would be able to qualify (limiting the damage).. the funding here basically comes from the borrower and so there are no budgetary restrictions. This means that the monetization of the tax credit will have a much greater impact than I previously thought. If you thought inventory was low on the low end before just wait until this program is fully implemented. Buyers will be able to have zero down and have the sellers pay closing costs... Nothing like impulse buying a house. Clearly we have learned nothing from the housing bubble.

Mark Zandi: "There was a regulatory failure, and taxpayers have a fiduciary responsibility to make it right"

Mark Zandi thinks we haven't gone far enough bailing out homeowners (emphasis mine)...

The administration and Congress should therefore prepare a plan B. And it must be simple: For example, anyone who got a mortgage from 2005 to 2008 on a home they live in that was inherently unaffordable at origination - their debt-to-income ratio exceeded 31% or the loan was more than 90% of the home's value - qualifies for a loan modification that reduces the principal to the current appraised value of the home. Taxpayers would bear the cost of the principal reductions, appraisals, income verification and other paperwork.

This straightforward approach benefits everyone involved. Since the eligibility criteria are clearly defined, homeowners would not be able to default on purpose to get the modification. And it is fair: If the loan was inherently unaffordable at origination, regulators should never have allowed it in the first place. There was a regulatory failure, and taxpayers have a fiduciary responsibility to make it right. Besides, taxpayers will also benefit as the foreclosure crisis abates, because house prices will stop declining, and that will end the drain on the financial system and broader economy.

I wonder if Mark realizes that pretty much every FHA loan would be eligible for his loan modificaiton.. even ones originated today. I think the failure was at every level regulatory, personal responsibility, fiduciary duty, etc. To single one area out and make that area wholly responsible for the whole mess is a tremendous leap in logic. Each area is shouldering some of the burden.

On the loan modification plan Mark Zand I agree.. it makes little sense for homeowners to get the loan modification as they are currently structured. Most homeowners would be better off starting fresh and repairing their personal balance sheets then sinking money down the black hole that they've been putting money into all these years:

The plan is also guilty of kicking the can down the road. The lower monthly mortgage payments under the plan last for only five years, and for many homeowners deeply under water, it makes no sense to keep paying on their mortgages no matter how affordable the payment is. Why spend $5,000 fixing your roof if you are already under water by $20,000? That's why many of these homeowners will ultimately land back in foreclosure.

Short Sale & Foreclosure for San Fernando Valley & Ventura County - May 2009

San Fernando Valley:

Ventura County:

Note: I have added a foreclosure research link to the site, see here.

Here are the sales breakdown for the San Fernando Valley and Ventura County for May 2009. Distressed sales are still the majority of sales and the short sale component of distressed sales are slowly gaining strength. Foreclosure / REO sales have declined as a percentage of sales the past 3 months with Ventura County dropping especially far. Watching the weekly inventory chart and the distressed sale to pending sale ratio we have seen a particularly large drop in Ventura County for awhile now so it is no surprise to see REO sales weaken. The fact that sales are even this "good" (historically very low but it could be much worse) suggests that there are at least some normal (equity, probate or investor) sellers pricing realistically. The initial surge of demand caused by ultra-low rates and the new tax credit has just demolished inventory on the MLS on the low end. With lenders still not being aggressive taking back inventory these supply issues should continue for awhile and so sales should be muted. If rates spike again (the bond market had another bad day today) and stay in the 5.5%+ range it will really put a cramp in the markets rally. These numbers are preliminary and should increase about 10% over the next 10-12 days due to late reporting.