Ventura County December 2008 Loan To Value chart

Here is the December 2008 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.
The green shaded areas are places where private mortgage insurers are tightening and eliminating coverage. 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 (currently running 38% 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.

Ventura County November 2008 Loan To Value chart

Here is the November 2008 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.

The yellow shaded areas are places where private mortgage insurers are tightening and eliminating coverage. 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 but its effect was marginal on the market to begin with.

More on December San Fernando Valley home sales - 2008

Here are the various Back On Market (BOM) measures for San Fernando Valley home sales. Each kind of tells a slightly different story, BOM as a percentage of sales is falling, BOM as a percentage of current pendings is flat and BOM as a percentage of last months pendings is rising. The SRAR chooses to use BOM as a percentage of sales as what they track. They all were around 37% last month. A healthy chunk of aren't able to close.

Total sales (SFH + Condo) were 922 last month. Total pendings for the month came in at 914 and BOM for December was 342. January will definitely be better than last year but clearly not be as good as December '08. That is normal seasonality of January and February being the slowest months of the year. If we use history as a guide, we should start seeing pendings and New listings pick up after the Super Bowl.

San Fernando Valley December 2008 home sales report

The official December 2008 San Fernando home sales have been released. Single Family Home (SFH) sales came in at 691 which was up 9.16% Month over Month (MoM) and 73.62% Year over Year (YoY). Median SFH price came in at $353,000 which was down 5.87% MoM and down 34.26% YoY.

Condo sales came in at 231 which was up 16.08% MoM and 75% YoY. Median price for a condo was $225,000 which was up 2.27% MoM and down 31.82% YoY.

As we have seen previously distressed sales are in control and driving the market lower. The banks were clearly motivated in this last month of 2008 to get deals closed. Sales are still weak but are mildly improving as prices drop.

I'll have more on San Fernando Valley's December sales later this week.

Ventura County December 2008 Sales

Dataquick released figures for Ventura County today. Sales volume was 876 which was up 20.2% Month over Month and 48.5% Year over Year. Median price was $338,000 which is down 4.79% Month over Month and 35.60% Year over Year. Dataquick notes that 55.7% of Southland sales were foreclosures, similiar percentages as seen in my previous breakdown of distressed sales. Currently Dataquick doesn't give short sales percentages but we see they are a rising force in the marketplace.

I think the banks and servicers got motivated at the end of the year to clear as much inventory as possible. The reason I say this is because in my weekly pending counts I never saw a surge of pendings or contingent transactions. It looked like there was a rush to close as many pendings deals as possible before the end of the year. Any strength in sales volume is tempered by the source of that strength, falling prices because of distressed sales. Sales volume is still very weak relative to history. If the distressed sales ever slow, sales will slow right along with them. While affordability has improved that doesn't mean homes are affordable.

Short Sale & Foreclosure for San Fernando Valley & Ventura County - December 2008

SFV:
Ventura County:

Here are the updated numbers for December 2008 for the San Fernando Valley and Ventura County. Foreclosures posted their highest volumes for the year. I think the servicers have bulked up their asset management divisions to deal with the inflow better. This will mean less of a loss for them going forward as they can cycle through inventory faster instead of it sitting waiting in the wings to be processed and brought to market. The discretionary seller will be increasingly pushed aside unless they are willing to compete with the distressed market. I perused pendings in a couple markets to see if there is any difference in composition going forward and based on my initial observations it looked like more of the same for the foreseeable future.

Preliminary December 2008 San Fernando Valley Home sales

Here are my estimates for December 2008 sales for the San Fernando Valley, Single Family Home sales look to come in around 730 and median price of approximately $365,000. Condo Sales are estimated around 230 and median of $225,000. The holidays could mean we have a larger than normal number of late reporters, I will know more about that in a couple of weeks.

The strength in the market was completely based on distressed sales. We may have had a quarter end where banks are trying to maximize the number of sales and book the losses into a "kitchen sink" type quarter. Or a more pessimistic view might be that the banks see things getting worse and worked to drive volume to keep from being overwhelmed. The economy and continued credit tightening are the significant negatives for the market. Low interest rates and continued liquidity in conforming mortgages is about the only positives right now.

San Fernando Valley foreclosure and short sales contine to climb - December 2008

Here is the preliminary numbers for the San Fernando Valley for December 2008. Short sales and foreclosures are almost 70% of closed sales matching a similiar trend we saw in Ventura County in December. Closed short sales and foreclosures are at high for the year. So while we may hear about "strong" December sales it is only because distressed percentage of sales is very high. If any sort of program comes out that reduces distressed inventory and slows price declines it will have a dramatic effect on slowing sales.

Ventura County October 2008 Loan to Value chart

(click to enlarge)

This is the October 2008 Loan to Value chart for Ventura County. Here is a summary of what the chart is telling us from last months post on the topic:

The left axis represents the purchase price of a home and the bottom axis represents the LTV of the loans on the homes at purchase. So a dot at $300,000 and 80 LTV would mean that a borrower put $60,000 dollars down on a $300,000 home and the loans on the home total $240,000. The higher the LTV the more aggressive the loan is considered to be. By click on the graphic you will notice the almost solid red line at around 97% LTV. This represents FHA singular dominance in the aggressive lending arena. The shaded blue area represents where private mortgage insurance is bring eliminated for conforming loans (Loans under $417,000). The shaded green area represents where private mortgage insurance is being eliminated for "Jumbo conforming" loans (those under the jumbo conforming limit which was $729k and is being lowered to $598k January 1st, 2009). In these two shaded areas the blue dots (conventional) should disappear by early 2009 and only red dots (FHA) should remain. The pink line represents the old jumbo conforming limit and the green line represents the new jumbo conforming limit. The loans in between these two lines will most likely not be made after January 1st. Or if they are made they will be made at much higher rates than those under the limits shown.

I should also note that October 1st 2008 was the deadline for locking Seller Funded Down Payment Assistance loans for FHA. This was the last major easily available source of 100% financing. While I think FHA will continue its significant presence for a long time the requirement of even a mere 3.5% down coming from the borrower will have a dampening effect on the market. Lower prices and lowered expectations (buying less house) by borrowers with little down payment will be the result of this change. With the jumbo conforming limit dropping, slow economy and lack of move up buyers being generated in this market means that it is the higher end turn to experience the brunt of the depreciation in 2009. The low end will still fall of course but we could see the bottom end dropping 15% while the top end drops 25% as an example of what I think could go on this year. The desire to purchase high end properties is always there, what isn't there right now is the ability to do so.

Ventura County short sales & foreclosures 70% of closed sales - December 2008

These are preliminary numbers for December and the totals could change by 10-15% in the next few weeks but the ratios should be about the same. It is amazing that 70.92% of sales were distressed in some manner. And of the remaining 29.08% there was a high number of vacant, relocations, trust / probate, and investor owned sales. I estimate that only about 15% of closed sales in December were by sellers who owned their home and were currently living in it. I think the banks were trying to clear the decks as much as possible to put the losses in 2008. If the banks could push this level of volume during January and February I will be impressed. If they are able to it will clearly be a matter of pushing price and crowding out discretionary sellers.

FHA gaining in latest September 2008 Ventura County LTV chart

(click to enlarge)

This is the Loan to Value chart for Ventura County September 2008. The left axis represents the purchase price of a home and the bottom axis represents the LTV of the loans on the homes at purchase. So a dot at $300,000 and 80 LTV would mean that a borrower put $60,000 dollars down on a $300,000 home and the loans on the home total $240,000. The higher the LTV the more aggressive the loan is considered to be. By click on the graphic you will notice the almost solid red line at around 97% LTV. This represents FHA singular dominance in the aggressive lending arena. The shaded blue area represents where private mortgage insurance is bring eliminated for conforming loans (Loans under $417,000). The shaded green area represents where private mortgage insurance is being eliminated for "Jumbo conforming" loans (those under the jumbo conforming limit which was $729k and is being lowered to $598k January 1st, 2009). In these two shaded areas the blue dots (conventional) should disappear by early 2009 and only red dots (FHA) should remain. The pink line represents the old jumbo conforming limit and the green line represents the new jumbo conforming limit. The loans in between these two lines will most likely not be made after January 1st. Or if they are made they will be made at much higher rates than those under the limits shown.

The WSJ had an article on the FHA tonight that ties with what the chart is telling us is happening in the marketplace (emphasis added) :

The FHA, which insures lenders against defaults on home mortgages that meet the agency's standards, saw its share of new mortgages increase to 26% in this year's third quarter, up from 3% for all of 2007, according to Inside Mortgage Finance.
Some worry that the growth has come too fast, especially as the FHA expands rapidly into the most risky markets and insures bigger loans.
...
Still, some housing experts worry that an outsized share of the FHA's new business is coming in these high-cost housing markets. "It's getting into markets that are a lot riskier than it has in the past," says Ann Schnare, a housing consultant.
...
Private mortgage insurers are more restrictive. For instance, Genworth Mortgage Insurance Corp. requires down payments of at least 10% in areas with falling home prices and 15% if the loan is larger than $417,000.
...
As the private market imposes much tougher standards, the danger is that the riskiest loans will flow to the FHA, says Joe Rogers, an executive vice president in the home mortgage business of Wells Fargo & Co.

Financing and the home loan market are a slow moving train, the fate of whether or not some of these decisions made to be aggressive in the face of a falling market won't be decided for some time now. But if the FHA is wrong it is the taxpayer that will be bailing them out. Business Week had an article on FHA and how some of the brokers were gaming the system just like during the subprime boom. If enforcement isn't stepped up to police the originators this issue could blow up even bigger than expected. Putting a large number of people who clearly have an unreasonable expectation for price appreciation for homes into instantly underwater homes during a downward economy sure doesn't seem like a good idea. Defaults on these originations should reach very high levels and I can imagine a congressional hearing sometime in the future when the taxpayers will be asked to pay for this when some FHA official will be saying, "Nobody could have possibly seen this coming".

San Fernando Valley November 2008 home sales report

The official November 2008 numbers are out. Homes sales (SFH) came in at 633 (my estimate was 630) which was down 15.03% MoM and up 78.31% YoY. Median price came in at $375,000 (my estimate was 385,000) which is down 8.54% MoM and down 32.74 YoY. SFH median prices are currently down $280,000 from the peak or -42.7%. October and November of last year were the weakest months of the year due to the lenders pulling away from securitizing mortgages and Countrywides famed troubles so the year over year comparisons are easy to beat. Sales are still weak and prices continue to fall.

Condo sales came in at 199 (my estimate was 202) which is down 14.95% MoM and up 41.13% YoY. Median price came in at $220,000 (my estimate was $245,000) which was down 2.22% MoM and down 41.33% YoY. Condo sales are still performing horribly despite massive declines. Considering all the condo projects in the valley this doesn't look to reverse anytime soon.

Here is the Back on Markets relative to sales, this months pendings and last months pendings. I am trying to find the best representative way of showing how pendings falling out of escrow are affecting sales.

Sales for November totaled 832, escrows opened in November totaled 951 and BOM came in at 355. Based on current pendings and BOM ratios compared to previous trends Decembers total sales (SFH + Condos) should come in around the 650 range.

As the PMI changes take affect combined with the Jumbo conforming limit dropping we will see the mid to high level market taking the brunt of declines. People wanting a loan above the Jumbo conforming limits will pay a high premium and the people wanting to pay less than 85% LTV on a Conforming Jumbo will have to go FHA which can be restrictive. From what I am seeing is an inkling of what is to come in some of the data. You see the conforming loans staying liquid and closing pretty well. Above the conforming limit there is this logjam of contingent homes waiting to close, I am assuming besides the normal bank delays for short sales and REOs that financing is an issue and people are working to get deals closed before buyers give up. This may have contributed to the decline in median due to mix shift. The higher up the price range you go the less demand is able to be effective.

Ventura County November 2008 Sales

Dataquick released figures for Ventura County today. Sales of 729 were down 9.1% MoM and up 41.3% YoY. The median prices was reported as $355,000 which is down 5.3% MoM and down 31.9% YoY. Foreclosure resales were 47.8% of sales for November. This is just more of the same deterioration with banks staying motivated during the slow months price suffers. Considering the headwinds of the market some might think this isn't that bad of a report. But in historical context this is clearly a dismal sales report.

Dataquick claims that sales were low because there were fewer business days that the recorders office was open. I think it is much more likely that sales were this weak and the effect on recording due to fewer business days wasn't that great. With the month ending on a holiday weekend that might have some minor affect but no data I see anywhere suggests that this will be a December of any strength.

Short Sale & Foreclosure for San Fernando Valley & Ventura County - Novemeber 2008

Here are short sales and foreclosures as a percentage of total sales for November 2008.

Here is the San Fernando Valley:


Here is Ventura County:

You can see the banks continuing to stay motivated and push inventory as much as possible and we may see distressed sales hit 2/3 of all sales in Ventura in December. An amazing statistic. Also as I have mentioned before I think distressed sales are underrepresented because some agents do not set the proper flags for foreclosure or short sale.

Anytime you hear how "great" sales are in a news article just remember that they would simply be horrible if it wasn't for the banks staying motivated. In the context of these numbers traditional metrics like months supply of homes means little. The banks are intentionally pricing low to reduce time on market. Months supply will drop as a result of this but it isn't an indication of strength. Inventory on the market should continue to drop as discretionary sellers recognize the bad market conditions and give up even though a sale now will probably net them more than a sale in the next few years.

Preliminary November 2008 San Fernando Valley Home sales

Here are my estimates for November 2008 sales for the San Fernando Valley, Single Family Home sales look to come in around 630 and median price of approximately $385,000. Condo Sales are estimated around 202 and median of $245,000. Seasonality and lending guideline changes hitting the market hurt the market in November there is a possibility that the Thanksgiving holiday will cause a higher number than normal late reporters. We will know more about that in 2 weeks.

The issues that will be affecting the market for December and January outside of seasonality will be the Federal Reserve targeting longer term interest rates trying to reduce them. This has brought mortgage rates near 5% for vanilla, well qualified borrowers. Loan modification plans are starting to be rolled out en masse trying to relieve the foreclosure pressure. The headwinds to all that is continued contraction of mortgage credit and lending guidelines and of course the economy.

Back on Market for San Fernando Valley October 2008

Graph of Total Sales, Total Back On Market (BOM) and monthly Pendings:
Back on market as percentage of current pendings and previous months pendings:

Back on market as a percentage of the average of the previous 3 months pendings average:

Total Back on market came in at 439, down 1 from 440 the month before and up 219 from 220 the year before.

Pendings for October 2008 came in at 1180, down 120 from 1305 the month before and up 574 from 606 the year before. Fallout is still very high and if pendings slow down even a little we will see a dramatic drop off in sales.

San Fernando Valley October 2008 home sales report

The official October 2008 numbers are out. Home sales (SFH) came in at 745, a 13.22% increase MoM and 110.45% increase YoY. Last year at this time we were in the depth of the secondary mortgage market shutting down causing a historic low in sales. Now that prices are adjusting downward sales are picking up a bit though still historically weak. Median price came in at $410,000, up 4.46% MoM and down 30.51% from last year. Median prices are down over $245,000 from the peak.

Condo sales came in at 234, a 10.90% increase MoM and 82.81% increase YoY. Median price came in at $225,000, down 13.46% MoM and down 40.79% from last year. Condo median prices are down over $190,000 from the peak.

There was a significant number of late reporters last month so I will update my short sale and REO percentage chart to reflect the current numbers (Update, This is incorrect my stats didn't reflect the recent changes incorporated in the site I use). Looking at current closings for November we are approximately running 1/3 behind the previous month (no adjustment made for late reporters). The banks and sellers could have rushed to close the deals in October because of the market turmoil and that might have pulled forward closings from the next two months. We also have the holidays starting and demand will be weak just based on seasonality alone.

Pendings also weren't released yet, I will have pendings and Back on Market ratio charts up this weekend.

Ventura County October 2008 Sales

The October 2008 report from Dataquick was released today. Sales were flat month over month at 802, down 6 (-.75%) from the previous month. Sales rose 264 (49.10%) from the year before when we were in the depths of the mortgage crisis. Median price was down $10,0000 (-2.5%) to $375,000 from the month before. Year over year the median price dropped $160,000 (-29.10%) from $535,000. Sales are stronger but not strong. They are only driven by a continued presence of motivated sellers, if those get removed from the market sales will slow considerably.

Short Sale & Foreclosure for San Fernando Valley & Ventura County - October 2008

Here are short sales and foreclosures as a percentage of total sales for October 2008.

Here is the San Fernando Valley:



Here is Ventura County:

October has been the best month of the year for sales. Dramatically so for the SFV relative to other months. Though sales are still weak historically. But as we can see from the charts it is because the banks are continuing to stay motivated and move inventory. I think REO activity is higher than the stats suggest (maybe as much as 3-4%) because there are agents who simply do not know how to set the REO flag in the MLS. It seems much more of an issue in the San Fernando Valley. However the reports come out next week for sales as a whole, this part of the State is trending upwards at the expense of price. We will see if the wholesale loan modification talk has any effect on the market. Anything that affects the continuing downward movement in price will stop and most likely reverse any sales growth we have seen so far. Sales have only been so "good" because the sellers (mostly banks) are continuing to cut price until they get an offer.

August 2008 Ventura County Loan to Value Chart

Here is the Loan to Value scatter chart for Ventura County for homes and condos sold in August 2008. The upper pink line represents the current conforming jumbo limit and the lower pink line represents the new conforming jumbo limit starting January 1st. The loans in between these two lines won't be closed without either a higher down payment or seller price concessions. The yellow shaded area represents the area in which mortgage insurance is tightening that I detailed in my previous post. FHA or banks taking seconds will be the only option available to borrowers in this area. You can see that FHA is definitely gaining in popularity with fewer blue dots (representing conventional loans) populating this area compared to previous months. Credit is still tightening and only price concessions are keeping sales volumes up. If those price concessions slow due to things like foreclosure moratoriums or loan modifications sales volumes should drop considerably in response.