San Diego Trustee Sales October 2009

San Diego trustee sales for October 2009 came in at 1336. This was the best showing since June.

Orange County Trustee sales for October 2009

Orange County trustee sales for October 2009 came in at 857. This was the best showing since June 2009. As always I am impressed with how many trustee sales in Orange County go to a third party. I have a hard time believing there are enough deals that pencil out to support near 40% third party sales to investors. I wonder if owner occupied buyers are just dealing with low inventory by paying retail (or close to it) on the courthouse steps.

Trustee Sales for Los Angeles County October 2009

Los Angeles County Trustee sales came in at 3437 for October 2009. This is the highest total since June. It will be interesting to see if this trustee sale momentum continues.

Ventura County Trustee sales for October 2009

Trustee sales for October 2009 in Ventura County came in at 303. This was a bit higher than I expected and the best showing since June. Third party trustee sales continue to gain momentum as investors rush in to take advantage of the low supply enviroment.

Weekly Housing Inventory update for SFV & Ventura - 10/31/09

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 1714
Active - Short sale 44536
Active - REO 148
Backup - Total 755
Backup - Short sale 466
Backup - REO 43
Pending - Total 1500
Pending - Short sale 832
Pending - REO 260
Distressed active / Total active = 34.6%
Distressed pending / Total Pending = 72.8%

Condo
Active - Total 580
Active - Short sale 235
Active - REO 64
Backup - Total 353
Backup - Short sale 269
Backup - REO 18
Pending - Total 594
Pending - Short sale 325
Pending - REO 125
Distressed active / Total active = 51.6%
Distressed pending / Total Pending = 75.8%

Ventura County:
Single Family Homes
Active - Total 1317
Active - Short sale 165
Active - REO 91
Contingent - Total 963
Contingent - Short sale 623
Contingent - REO 62
Pending - Total 608
Pending - Short sale 193
Pending - REO 137
Distressed active / Total active = 19.4%
Distressed pending / Total Pending = 54.3%
Release from Showing 265

Condo
Active - Total 378
Active - Short sale 79
Active - REO 39
Contingent - Total 463
Contingent - Short sale 359
Contingent - REO 25
Pending - Total 248
Pending - Short sale 97
Pending - REO 67
Distressed active / Total active = 31.2%
Distressed pending / Total Pending = 66.1%
Release from Showing 68

FHA concentration in California homes sales

This chart represents the number of FHA endorsements for California divided by the number of home sales reported on a monthly basis by Dataquick. FHA's loose underwriting, falling prices, supply being held off the market and ultra low interest rates are what are currently affecting the low end so dramatically here in CA.

Ventura County Demand versus Inventory - October 2009

I have been a bit busier the last month or so and this chart was one of the casualties last month. This is the demand vs inventory chart for Ventura County current as of today. I split the chart up into Single Family Homes (SFH) and condos. Note the X-axis on the charts are different as is (unfortunately) the color coding so make sure to check the legend on the chart to orient yourself when you click to enlarge. As you can see inventory is very low on the low end. The huge number of contingents represent a lot of short sales just sitting their not being processed. The mid to upper end of the market clearly needs some adjustment and the low end is doing pretty well because supply is being choked off by various programs.

If there is a big need I can make the combined chart so people can compare todays demand to earlier months but this gives you the general sense of the market as we stand today. If I was a RE professional I would be thinking about what those charts represent.... Slower sales in the coming months due to low supply in the high demand segments.

Still can't figure out the new rumored tax credit.

From Bloomberg:

The deal would reduce the size of the tax credit to 10 percent of the sale’s price, capped at $7,290, the people said. The credit would be available on home purchases that are under contract by April 30, and borrowers would have 60 days more to close the sale. The existing credit is due to end Nov. 30.
....
The income eligibility for first-time homebuyers would remain the same at $75,000 for individuals and $150,000 for couples. The income criteria for step-up buyers would be $125,000 for individuals and $250,000 for couples.

The credit would be limited to homes costing $800,000 or less. There is currently no price cap on home purchases.

I've gone over this a few times in my head and I can't figure out why the income cap for first-time homebuyers is different than the credit for existing homeowners. The best I can come up with is it is a give away to the NAR and NAHB so they can pitch existing homeowners to trade up. But it seems weird to limit the FTHB like that. If you are trying fill empty homes you want to stimulate any new homebuyer not trade up sales. It just seemed designed to increase transactions at a very high cost to taxpayers but not really do any good for the market.

New FHA Hope for Homeowner guidelines

HUD has released the new guidelines for the FHA Hope for Homeowners (H4H) program. Readers may remember that the previous version of H4H failed miserably and was completely ineffective. This version was designed to be more readily available to lenders so they could foist their toxic waste onto the backs of the taxpayers. I am sure it will be wildly successful in doing so.

With this version, if a borrower isn't yet in default the lender can refinance up to 105% LTV. If a borrower is in default the lender can lend up to 96.5% LTV if they keep 31/43 front/back debt to income ratios. And if a borrower is in default and the lender wants to push the ratios to 38/50 then the max LTV becomes 90%. Readers may remember the previous version required a max LTV of 90% regardless of scenario. I think the "borrower not in default" version will be very popular as it cleans up the banks books very nicely and turns toxic sludge into a loan in which no capital needs to be held against it since it is now guaranteed by the US government.

The up front mortgage insurance premiums (MIP) was 3% in the previous version and now it becomes 2%. The annual premium was 1.5% in the previous version and it is reduced to .75%. These premiums are what protects the taxpayers from having to bail out the FHA. Obviously the banks would want them as low as possible so that the borrowers are paying the banks more money rather than covering the FHA from losses. It looks like the banks did pretty good (from their point of view) in getting them reduced. Anyone thinking that the FHA won't be bailed out is delusional. It is simply a matter of when.

I went over what I thought the effects of this new H4H plan would be back in a post (more accurate: Rant) in early September that readers can read here:

"The Fed can tremendously influence rates, however temporarily, they can bring down rates to even lower levels so the qualification for H4H is easier and the banks can put as many loans in H4H in as little time as possible. While there may be a hit to capital to the banks they magically turn a non-performing loan into a performing loan which carries zero risk and they wouldn't have to withhold any capital or increase loan loss reserves against it."

I think that the underwriting details are sufficiently "loose" that the prediction could hold true. The banks will have to take principal write downs but I would bet for many non-performing loans the ability to refinance to FHA would actually free up capital. I would expect transaction volumes to drop even further as even less motivated supply comes on market. Fewer short sales due to H4H, fewer foreclosures due to HAMP. There will clearly be fewer people making their living in construction, real estate agents, and in the lending field as a result. Asset price "stability" will be maintained at a huge cost to taxpayers and the real estate industry but it is public policy that prices must be maintained. Allowing a massive credit bubble in the name of "free markets" but then socializing the losses AND having a policy that deflation will not be tolerated makes some pretty wacky (i.e. stupid) ideas suddenly sound logical to those desperate to "do something".

I wonder if the politicians have heard, or care about, adverse selection. I guarantee the banks are well versed and will act accordingly. The worst of the worst will get refinanced and the "good" loans won't be so the banks can maximize profit.

Weekly Housing Inventory update for SFV & Ventura - 10/24/09

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 1702
Active - Short sale 436
Active - REO 146
Backup - Total 765
Backup - Short sale 474
Backup - REO 35
Pending - Total 1511
Pending - Short sale 819
Pending - REO 268
Distressed active / Total active = 34.2%
Distressed pending / Total Pending = 71.9%

Condo
Active - Total 584
Active - Short sale 238
Active - REO 65
Backup - Total 354
Backup - Short sale 264
Backup - REO 17
Pending - Total 590
Pending - Short sale 334
Pending - REO 126
Distressed active / Total active = 51.9%
Distressed pending / Total Pending = 78.0%

Ventura County:
Single Family Homes
Active - Total 1313
Active - Short sale 156
Active - REO 90
Contingent - Total 981
Contingent - Short sale 637
Contingent - REO 64
Pending - Total 637
Pending - Short sale 197
Pending - REO 150
Distressed active / Total active = 18.7%
Distressed pending / Total Pending = 54.5%
Release from Showing 272

Condo
Active - Total 399
Active - Short sale 94
Active - REO 40
Contingent - Total 458
Contingent - Short sale 350
Contingent - REO 23
Pending - Total 244
Pending - Short sale 93
Pending - REO 77
Distressed active / Total active = 33.6%
Distressed pending / Total Pending = 69.7%
Release from Showing 71

DQ Foreclosure report and California Shadow Inventory

Dataquick reported on California foreclosures and defaults today in their press release. The above graphic is basically a rebuttal against the believers that there are a large amount of homes already taken back by the bank sitting on the sidelines. Basically when the green line is above the blue line REO inventory is dropping and when the blue line is above the green line REO inventory is rising.

DQ jumped on trying to determine shadow inventory bandwagon as well with this quote:

Of the homes foreclosed on statewide in an 18-month period ending this July, about 82 percent have re-sold on the open market, while 18 percent, or more than 57,000 homes, have not. Of those that have not re-sold, it cannot be determined from public records what portion is currently being marketed for sale, as opposed to, among other things, being used as rentals or being left vacant and not for sale. Over the past year California buyers have snapped up an average of nearly 18,000 foreclosure resales a month.

Now 57,000 might sound like a lot but shadow inventory is about what isn't currently on the MLS being marketed and if it averages a month or two to turn around the home after trustee sale (call it 45 days) you can assume about half of those are on the MLS (either active, contingent, pending, closed but not yet recorded) and the other half are mostly in the pre-list phase. Meaning less than a month and a half of inventory at current absorption rates sitting on the sidelines yet to be marketed. Certainly not a flood waiting to be unleashed. Shadow inventory is the massive amount of homeowner in default not being foreclosed on.. it is NOT a bunch of foreclosed homes yet to be marketed.

You can read the DQ press release here.

Made my first offer..

I made my first offer recently. With pretty conservative (0% appreciation over 30 years, 1% inflation) calculations it is net neutral to positive over our rental situation the last few years. There is a pretty good chance of getting it net to us.. zero down. So the basic calculations were that we don't have to put a lot into the place, we like the area and if everything goes to heck the bank has a nice shiny well kept house to market.

I won't provide too many more details, as many know I am extremely private. But I thought it'd be a good topic for discussion.

Weekly Housing Inventory update for SFV & Ventura - 10/17/09

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 1701
Active - Short sale 447
Active - REO 143
Backup - Total 768
Backup - Short sale 474
Backup - REO 38
Pending - Total 1464
Pending - Short sale 787
Pending - REO 263
Distressed active / Total active = 34.7%
Distressed pending / Total Pending = 71.7%

Condo
Active - Total 566
Active - Short sale 230
Active - REO 71
Backup - Total 364
Backup - Short sale 261
Backup - REO 17
Pending - Total 595
Pending - Short sale 327
Pending - REO 132
Distressed active / Total active = 53.2%
Distressed pending / Total Pending = 77.1%

Ventura County:
Single Family Homes
Active - Total 1336
Active - Short sale 165
Active - REO 85
Contingent - Total 965
Contingent - Short sale 631
Contingent - REO 66
Pending - Total 660
Pending - Short sale 200
Pending - REO 161
Distressed active / Total active = 18.7%
Distressed pending / Total Pending = 54.7%
Release from Showing 274

Condo
Active - Total 388
Active - Short sale 90
Active - REO 36
Contingent - Total 451
Contingent - Short sale 348
Contingent - REO 25
Pending - Total 256
Pending - Short sale 96
Pending - REO 76
Distressed active / Total active = 32.5%
Distressed pending / Total Pending = 67.2%
Release from Showing 71

San Diego Trustee Sales Mid-October 2009

Here is the mid-October 2009 trustee sale update for San Diego County. Currently San Diego is on a sales pace for 1470 sales for the month. But due to fewer trustee sales being scheduled in the second half of the month I expect sales to come in around 1300 or so.

Orange County Trustee sales for Mid-October 2009

Here is the mid-October 2009 Orange County trustee sale update. Currently sales are on a pace to 878 sales for the month. Due to the fact that fewer trustee sales are scheduled the second half of the month than the first I expect sales to come in around 810 or so.

Trustee Sales for Los Angeles County Mid-October 2009

Here is the mid-October 2009 trustee sale update for Los Angeles County. Currently sales are on a pace to hit 3600 sales by the end of the month. Since there are fewer trustee sales scheduled over the next 10 business days than the previous 11 I expect sales to fall short.. around 3000-3100 for the month.

Ventura County Trustee sales for Mid-October 2009

Here is the mid-October 2009 trustee sale update for Ventura County. Currently sales are running on a pace of about 315-320 sales for the whole month which would be the highest monthly sales since June. I don't think the sale pace of the second half of the month will match the first due to the fact that the number of trustee sales scheduled for the rest of October is lighter than it was for the first half. I think sales will probably come in around 280, or marginally higher than the previous few months pace. While there hasn't been any rumblings of a holiday moratorium I am expecting at least the GSEs to institute one, but that is supposition on my part. If we do see a moratorium it should last from the last week of November through the beginning of January. This wouldn't mean no sales, just a reduced pace.

California Foreclosures for September 2009

The September 2009 ForeclosureRadar foreclosure report for California was released today. NOD are up MoM and YoY. NTS are down MoM and up YoY. Third party sales continue to rise as investors jump into the supply constrained market. Sean of ForeclosureRadar notes that cancellations continue to drop. This is interesting because if HAMP modifications are successfully being given out one would expect cancellations should rise. Bank owned inventory continues to drop as further proof that shadow inventory of bank owned homes is a myth. The story continues to be the record number of homes in default NOT being foreclosed on. I have also added the Ventura section of the report in the above graphics (as always, click to enlarge).

Everything continues to be put on hold. Who knew there was a pause button in real life?

Ventura County September 2009 Home Sales

Dataquick reported home sales for Ventura County for September 2009 today. Home sales came in at 784, down 3.0% YoY. The median sales prices came in at $371,750 which was down 3.4% YoY. Assuming people lock the month before they close August 2008 rates were 6.48%, August 2009 rates were 5.19%. People need to put todays market in context of the rates being so ultra-low to understand just how bad these numbers really are. The Federal Reserve claims to be winding down their MBS purchases and therefore rates will rise. I have a really hard time seeing how they will do so, can you imagine this market at 6.5% rates?

We are still in a supply constrained market, sales and price movements should be pretty static as long as that is the case. But rates, unemployment , defaults, etc are all building headwinds to the market. I keep thinking it can't stay like this forever but the people who own the printing presses are telling me I am wrong (and they are clearly winning the argument right now).

MBA Chairman excerpts on the problems with FHA

Interview with outgoing MBA Chairman David Kittle (emphasis mine):

LEW: Another good segue: You mentioned the FHA. Is the FHA a looming problem out there?

DAVID: It is a huge problem, probably potentially bigger than the issues we have right now. The brokers ran and got approved FHA when they probably shouldn't have. And they are taking the loans that they used to do subprime and taking them to the FHA. And it is a huge problem. The FHA insurance fund is under duress.

LEW: If the problem is not address, when are we going to see it explode, and what should we do to prevent that from occurring.

DAVID: The horse is already out of the barn. But that doesn't mean you can't go out and shoot the horse. To answer your question specifically, we need higher net worth requirements, higher level of entry into the business, and loan officer registration. The registration system is now in place. That's for everybody, and everybody agrees with that - bank, lender, broker.

But we need to hold to our underwriting standards. Right now, we are approving some people who shouldn't be approved. Their credit scores are too low. FHA still has the flexibility. Lew, when you are an underwriter - and I'm a delegated underwriter, by the way - you can sit there and still make a business decision on an FHA loan that you can't on a conventional loan. When it goes through Loan Prospector or Desktop Originator, Fannie and Freddie, and it comes back as a refer, that loan's dead. But if you input an FHA loan through LP and it comes back refer, you can go outside the guidelines. You have to take responsibility for the loan, but you can override that refer and approve that loan.

We need to get back to underwriting the way we used to do it. Say there's a bankruptcy because the borrower didn't pay his bills on time and squandered his money. Or I had a bankruptcy because I had a health issue, my wife died and I had paid my bills on time up until that point. You have to be able to look and make a judgment on the explanation given.

LEW: So are you saying FHA's underwriting rules are much too lenient right now?

DAVID: I'm saying right now that FHA underwriting rules are good, but they need to be followed stringently. There is flexibility in those rules that you don't have conventionally, so you have to be careful. That's one of the things that has always made FHA a great program, but right now, it is being abused. And next year, I fear we are going to pay for it.

FHA has the ability to go outside the guidelines and still approve the loan. But there isn't a downside for the brokers pushing people into bad loans outside the guidelines. The default rates have to get very high before FHA even notices and even higher before they do anything about it. Brokers are very good at finding the weak point of the system and exploiting it to their maximum. They are smart and find ways to get loans done... even if it wasn't one that is supposed to get done. These holes in the system will cost billions of dollars.. the open question now is how many billions and if/when the taxpayer has to pay them.

Banks & Brokers should have part of their commissions withheld by FHA for 24 months and that money is in the first loss spot if the loans goes into default. That way it won't be just the commission for one loan on the hook and the pain felt will be significant for the shop. The better loans they make the more money they make.

Much more in the interview on loan mods and the future of Fannie/Freddie... it's a good read.

Note: There isn't much talk about fixing the problems with FHA.. only expanding it so it will do more loans. Imagine New Century Financial / OwnIt / MLN type thinking but backed by Congress.

Weekly Housing Inventory update for SFV & Ventura - 10/10/09

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 1728
Active - Short sale 4660
Active - REO 149
Backup - Total 760
Backup - Short sale 467
Backup - REO 38
Pending - Total 1455
Pending - Short sale 773
Pending - REO 272
Distressed active / Total active = 35.2%
Distressed pending / Total Pending = 71.8%

Condo
Active - Total 600
Active - Short sale 251
Active - REO 61
Backup - Total 341
Backup - Short sale 247
Backup - REO 17
Pending - Total 578
Pending - Short sale 315
Pending - REO 136
Distressed active / Total active = 52.0%
Distressed pending / Total Pending = 78.0%

Ventura County:
Single Family Homes
Active - Total 1356
Active - Short sale 162
Active - REO 94
Contingent - Total 973
Contingent - Short sale 632
Contingent - REO 64
Pending - Total 657
Pending - Short sale 196
Pending - REO 167
Distressed active / Total active = 18.9%
Distressed pending / Total Pending = 55.3%
Release from Showing 281

Condo
Active - Total 388
Active - Short sale 91
Active - REO 38
Contingent - Total 456
Contingent - Short sale 347
Contingent - REO 26
Pending - Total 255
Pending - Short sale 94
Pending - REO 69
Distressed active / Total active = 33.2%
Distressed pending / Total Pending = 63.9%
Release from Showing 65

How are these FHA loans being made?

From the NYT (emphasis is mine):

“what does the F.H.A. think it is doing by asking only 3.5 percent?”

Any more than that and Ms. Shimon, 45, would still be a renter. As it was, she cashed in her retirement savings account to come up with the necessary funds. She did not have enough to spare for closing costs, so her mortgage broker arranged a deal where the charges were wrapped into the loan at the cost of a higher interest rate. She cried when the deal was done.
...
Is Ms. Shimon a good bet? Even she has no easy answer. Her mortgage payment, $1,100, is half of what she takes home every month. It is not easy to make ends meet....

If we are generous and assume Ms. Shimon pays 25% for taxes, social security, etc. Her FRONT END DTI (just housing costs and no other debt) is almost 38%. It is highly doubtful she pays that much in taxes so it is likely her DTI is much higher. Are we really doing this person any favors giving her a loan? Rolling closing costs into a loan for a buyer who is marginal to begin with just maximizes the cost to the borrower. We

And:

Chaz Fullenkamp, an automotive technician in Columbus, Ohio, got an F.H.A. loan even though he was living on the financial edge. “If I got unemployed, I’d be wiped out in a month or two,” he says. Thanks to the F.H.A., however, he is better off than he used to be.

Mr. Fullenkamp used F.H.A. insurance to buy a house this spring for $179,000. The eager seller paid the closing costs and also gave Mr. Fullenkamp $2,500 in cash. He immediately applied for the $8,000 tax rebate. Even taking his down payment into account, he came out ahead.

“I knew in my heart I could not really afford the house, but they gave it to me anyway,” said Mr. Fullenkamp, 22. “I thought, ‘Wow, I’m surprised I pulled that off.’ ”

There are a couple zingers in here. First, with cash back at closing and the tax credit this borrower got PAID TO BUY A HOUSE. This is the stuff that was happening during the end of the boom to move houses at too high of prices to a sucker buyer. Second, the borrower knows he can't afford the house... decides to try and buy it anyways and the bank has no problem giving him a loan because the loss is on FHA not the bank. Insanity.

Barney Frank is always good for a blood boiler and he doesn't disappoint:

Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, said in an interview that the defaults were, in essence, worth it.

“I don’t think it’s a bad thing that the bad loans occurred,” he said. “It was an effort to keep prices from falling too fast. That’s a policy.”

Yes, it is clearly the stated policy of the administration to support housing at all cost and the stated policy of the Federal Reserve for "price stability". Apparently we will throw the borrowers under the bus, the taxpayers under the bus and the dollar under the bus to make sure that happens. Yet the line we are being sold is that we are all better off for it.

Providing liquidity is one thing. Keeping the mortgages flowing and giving them to people who can afford them under normal underwriting guidelines is a very positive thing. But just giving away unsound loans in the desperate hope to stop falling prices and pay for it later is madness. You have borrowers who are financially neutered for a very long time and the losses will be borne by the taxpayers. This is kicking the can and buying time with the financial lives of uneducated borrowers (Don't forget these borrowers profiled on CNN, FHA as well).

The lies being spread about sound underwriting by the FHA are just designed to keep people from worrying about the problem until we have another "We have to bail them out, they are too big to fail and a systemic risk if we don't" moment. Nobody could have possibly seen this coming.. right?

C.A.R .2010 Forecast

Today the C.A.R. released their 2010 Forecast today, I have added last years forecast and some of the changes made as a way of measuring how well they did throughout this last year. It was painfully obvious that last years forecast was outdated the instant they gave it. And I said so at the time. Looking at the sales trend before the forecast for the previous months they were all showing things much different than the presentation the CAR gave. The forecast is the highlight of the CAR Expo every year and it is always sold out from what I hear.

My favorite quotes of mine from last year regarding the forecast:
"So why, when faced by the one crowd whose job it is to educate and prepare for the upcoming season do they sugar coat the price decline issue? It is really unfortunate that they can't bring themselves to be realistic as good information will be one of the things that will help this situation normalize."

And:
"I think the CAR doesn't have any data models or anything sophisticated they just forecast sales and prices +/- 5% and then adjust throughout the year based on incoming data."

I'll have to think some more on the forecast and go through the presentation a bit more to formulate an opinion. But my guess is they are underestimating the median price improvement (due to the mix shift that I believe will happen in 2010) and overestimating sales. I am reminded of some wise words I once heard, "If your numbers are off more than 10%, you are just guessing". The CAR is just guessing and people give their opinion way too much credit.


New Forecast for 2010:
June 2009 Forecast:


April 2009 Forecast:


Updated January 2009 Forecast..

January 2009 Forecast:

December 2008 Forecast:

October 2008 Forecast:

Trying to figure out reality

I don't mean to wax philosophic much but as a regular guy just watching the economy and real estate it is becoming tougher and tougher to define reality. I have many tools at my disposal at numbers I can run to see where the market is at any one point in time. But nagging in my mind is the massive government interference in the market dynamic of the housing market. How can any rational person enter the market with the interference in place? What happens when it goes away? What happens if it doesn't? How am I as joe six-pack supposed to deal with the decision of spending massive amounts of money on a home in context of this interference.

Rich Toscano over at Pigginton wrote an article the other day of a similar to Bill Gross of PIMCO article earlier this year basically saying don't fight the Fed/Government. Anyone saying the market is only this "good" right now because of government interference (as I have said here) is missing the point that the government interference isn't leaving anytime soon. That is fine over the short term (3-5 years) over the long term with a long term investment that a home is, its a different story, you have to look at what the market looks like with normal interest rates and normal debt to income ratios. This is a very large investment decision (the largest most people make in their lives) and one I personally think should be given much more weight than I see people giving even with all that is going on.

So here I am, a person who just wanted to buy a house in late 2005 and who is still waiting to see something that makes sense. It is depressing to think that that day might never come. The Fed and Government clearly are saying reality is different than what is has been the previous 50 years (housing/credit bubble not included). I can't fight them and I have no desire to join them. They own the printing press so they can win any war on savers.. but the cost to the nation for such things is great as well. So it is an interesting quandary... What is reality?

My reality is that I re-upped my lease. My housing consumption will remain minimial until I see value, if I never see value, so be it.

Weekly Housing Inventory update for SFV & Ventura - 10/03/09

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 1750
Active - Short sale 466
Active - REO 150
Backup - Total 750
Backup - Short sale 466
Backup - REO 38
Pending - Total 1548
Pending - Short sale 779
Pending - REO 284
Distressed active / Total active = 35.2%
Distressed pending / Total Pending = 68.7%

Condo
Active - Total 601
Active - Short sale 253
Active - REO 64
Backup - Total 336
Backup - Short sale 245
Backup - REO 16
Pending - Total 579
Pending - Short sale 313
Pending - REO 146
Distressed active / Total active = 52.7%
Distressed pending / Total Pending = 79.3%

Ventura County:
Single Family Homes
Active - Total 1345
Active - Short sale 167
Active - REO 100
Contingent - Total 983
Contingent - Short sale 625
Contingent - REO 63
Pending - Total 683
Pending - Short sale 209
Pending - REO 171
Distressed active / Total active = 19.9%
Distressed pending / Total Pending = 55.6%
Release from Showing 281

Condo
Active - Total 379
Active - Short sale 82
Active - REO 31
Contingent - Total 458
Contingent - Short sale 346
Contingent - REO 27
Pending - Total 248
Pending - Short sale 92
Pending - REO 70
Distressed active / Total active = 29.8%
Distressed pending / Total Pending = 65.3%
Release from Showing 67

California short sales to speed up?

Note: I found an analysis from CAR Legal released today basically saying this issue does not affect the timing of the approval of short sales. Merely the timing after the short sale is approved. So this is a non-event. I'll leave the original post below.

From the bill analysis of SB 306:

5. Requires a beneficiary or his or her authorized agent to provide a short-pay demand statement to an entitled person or his or her authorized agent within 21 days of receiving a demand for the statement from the entitled person or his or her agent, but would provide that if a beneficiary or his or her authorized agent elects not to proceed with the short-sale transaction, he or she is not required to provide a short-pay demand statement; instead, the beneficiary or his or her authorized agent is required to provide a written statement regarding its decision not to proceed with the transaction, within 21 days of receiving the demand for the short-pay demand statement.

6. Further provides that if the terms and conditions of the short-pay agreement require approval by the beneficiary of a closing statement or similar document prepared by the escrow holder, approval or disapproval must be provided no more than four days after the beneficiary receives the closing statement, except as specified.

This looks to be an attempt by the legislature to speed up short sales. Basically if you put an offer on a short sale the bank would have to respond within 21 days. Now there is nothing that says the bank won't just say the payoff is the full amount and shove off but then short sales would have a much harder time closing. This could possibly spur lenders to streamline the process or maybe move to a pre-approved short sale model.

"stimulus jump-starts Conejo Valley real estate" - Really?

From a local Ventura County fishwrapper (emphasis added):

Chuck Lech, branch manager of Dilbeck Realtors with offices in the Conejo Valley and Los Angeles, said the government plan has “absolutely” jump-started the sluggish real estate market.

“It was meant as an incentive and has worked,” he said, adding that low interest rates and the changes in Federal Housing Administration loans have also been a boon to real estate sales.

Formerly, FHA loans were targeted to low-income families, but now the programs are intended for all first-time homebuyers.

Lech estimated that 40 percent of the sales in the Conejo Valley can be attributed to the stimulus plan, an estimate that is backed up by a survey published by the California Association of Realtors.

The association’s 2009 First-time Home Buyers Tax Credit Survey, released on Sept. 18, revealed that about 40 percent of first-time homebuyers reported that the federal tax credit played a critical role in their decision to purchase a home. The association surveyed 200 first-time homebuyers in California to determine the effectiveness of the government program.

“It is clear that the federal tax credit for first-time homebuyers is working, as evidenced by the spike in home sales in recent months,” said association president James Liptak. “This tax credit is arguably the most successful strategy employed by the government . . . to stimulate the housing market.”

I have the FTHB Tax credit survey and it doesn't differentiate between buyers who were thinking about buying and just moved up their buying decision a bit sooner and those who weren't thinking of buying but bought because of the tax credit.

From the previously posted charts for sales for Ventura. You will notice a big temporary spike in YoY numbers due to both seasonality and the fact the the initial $7500 credit that had to be paid back was allowed in April of 2008. Then you see diminishing returns as far as effectiveness, then the government gave $8,000 tax free in January2009 and you capture a new group of buyers (a lot of that YoY bounce is due to extremely favorable comparison, early 2008 was the worst sales in history). And as we move on into the market there are fewer and fewer suckers willing to spend HUNDREDS OF THOUSANDS OF DOLLARS just to get $8,000 back. My estimate for Dataquick for September 2009 is ~735 which would be down 8-9% YoY and the third consecutive lower YoY comparison.

If this is "absolutely" and "clearly" jump started the RE market and was "arguably the most successful strategy employed by the government . . . to stimulate the housing market" then that is more a sad story regarding the effectiveness of our government than anything else. The RE industry is doing exactly what the car industry did, trying to get a handout and keep it going. Except they are just stealing forward future demand than stimulating new demand, as we saw in todays post-Cash For Clunkers auto sales numbers. Sales are historically very low even though rates are at a ultra-low 5%, a tax credit and the FHA guidelines are very loose (as we saw in yesterdays "You can't teach stupid" update).

The tax credit is an extremely expensive way to stimulate sales, with each marginal sale estimated to cost $43,000. The RE industry is desperate for sales at any cost and is pulling out the stops to get another handout. The NAR is very powerful and I would be shocked if they didn't at least get an extension if not another expansion altogether.

Short Sale & Foreclosure for Ventura County

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

Here is the sales breakdown for Ventura County for September 2009. Short sales as a percentage of sales have made their best showing yet. Foreclosures / REO keep dropping and that is one of the major reasons sales are coming in so weak. With a normal amount of late reporters sales will come in around 600 which would be the third straight monthly decline in MoM and YoY sales. The basic issue is affordability and the government has short circuited price discovery. Sales are suffering as a result. There is also a heavy presence of trustee sale investor in Ventura County this results in fewer lower priced homes on the market and therefore fewer sales. Ventura County is a supply constrained market. Call me irrational but this isn't what a recovery looks like.

Short Sale & Foreclosures for the San Fernando Valley

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

Here is the sales breakdown for September 2009 for the San Fernando Valley. The pace of the REO percentage decline has slowed and short sales percentage had their best showing yet since I've been tracking the statistic. Traditionally the SFV has a higher amount of late reporters so I expect sales to come in around the 850-875 range which would down from the year before (something also seen in the Ventura numbers). The SFV market has some of the same supply issue plaguing other markets and that essentially puts an upper limit on sales. The mortgage rates may be at 5% rates and a tax credit but it don't matter one bit if a buyer can't find a home they can both afford and want to pay for. Investor activity is a bit less in the valley so sales should perform better than Ventura County where investor activity is higher which props up prices but will result in fewer sales.