San Fernando Valley home sales report - September 2010

San Fernando Valley Single Family Home sales for September 2010 came in at 581 which is up 7.79% MoM and down 15.06% YoY. This is the twelfth straight month of YoY declines and the second worst September on record for Single Family Home sales. The median price for single family homes came in at $395,000 which is down 1.25% MoM and up 3.95% YoY. The market is completed stagnated, the administration is keeping the motivated inventory generally off the market and there is no market clearing event so sales and buyers choices will continue to be horrible going forward. New pendings last month were at levels suggesting October will come in at or below September levels.

Condo sales came in at 194 which is down 6.73% MoM and up 2.64% YoY. Median price for condos came in at $220,000 which is down 4.34% MoM and down 5.17 YoY. Relative to SFH condos have been performing better but that is because there is more motivated condo supply than SFH. Sales are still horrible in historical context, just not as bad as SFH.

Based on September pendings (green line) the predictor (red line) suggest sales for October coming in about even.

Ventura County September 2010 Home Sales

Dataquick reported home sales for Ventura County for August 2010 today. Home sales came in at 682 down 13.0% YoY and down 5.1% MoM. The median sales price came in at $370,000 down 0.5% YoY and flat MoM. I noted in my early month estimate that my normal model predicted sales of 700-720 but due to changes in the underlying data used for estimates I thought closings would come in lower and that was what in fact happened. Currently October is running at 20% below September closings month to date so this horrible performance is continuing. To put these numbers in perspective the last time numbers were worse, 2007. Countrywide had just imploded and all that was left was FHA (which few were equipped to underwrite at a large scale) and the GSE's had a $417,000 limit. Additionally prices were much higher as were interest rates so the gap between buyers and sellers was much much wider. But right now we have a $729,000 loan limit, 4% mortgage rates and lower prices and sales are anemic. Prices are still too high.

Short Sale & Foreclosure for Ventura County - September 2010

Here are the sales for Ventura County September 2010. We are at levels which suggest flat to down sales from August but there is one caveat. The underlying data source has been undergoing some changes and I don't know how that will effect these numbers (there is more of a possibility of double counting now). So there is a possibility the numbers could come in a bit weaker than my call of 700-720 for the Dataquick Ventura sales number but I wouldn't think it would be dramatically lower (nothing lower than 650). I just don't have enough data at this point to know how the changes will effect my normal guesstimate.

Short Sale & Foreclosures for the San Fernando Valley - September 2010

Here is the sales breakdown for the San Fernando Valley for September 2010. The SFV has a lot more late reporters as a percentage of sales and so it is a bit tougher to discern right now just how weak sales will ultimately be for September. But, it appears that sales should be at the same levels as August perhaps slightly weaker.

San Fernando Valley home sales report - September 2009

San Fernando Valley Single Family Home sales for September 2009 came in at 684 which is up 2.09% MoM and up 3.95% YoY. The median price for single family homes came in at $380,000 which is down 2.31% MoM and down 3.18% YoY. Sales continue to be tremendously depressed even in the face of massive housing focused stimulus. The flip side of asset price stability is sub par transactional volume, there is no free lunch.

Condo sales came in at 189 which is down 17.82% MoM and down 10.43% YoY. Median price for condos came in at $232,000 which is up .87% MoM and down 10.77% YoY.

The red line was my attempt to create a predictor for sales but it hasn't been working out so well since May of this last year. IMHO, it appears that some pendings are being double counted, instead of falling out and going BOM (which would reduce my predictor_, they are just switching buyers and updating the pending date which gets them counted in the current months pendings again. This is supposition on my part since I don't know how SRAR constructs their numbers but nothing much else makes sense.

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.

Ventura County Trustee sales for September 2009

Here are the final trustee sales number for Ventura County for September 2009. Foreclosures decreased 4.1% MoM and are down 37.8% YoY. Third party sales are in a definite uptrend as investors look like they think they will be able to push homes through the slower off season months. October 2008 was the first major decline in trustee sales last year so it will be interesting to see if October 2009 will give positive YoY sales. BofA has been jawboning that they will be definitely increasing foreclosures in Q4, I wonder if Ken Lewis replacement will bow to pressure to reduce foreclosures once he takes over in Q1 of 2010. We could see a holiday moratorium from the end of November to beginning of January and then political pressure on a new CEO of a major servicer put a cap on sales through Q1 of 2010 (just presenting a possible scenario). Alternately we could see servicers finally taking more homes back as modification efforts fail.

Trustee Sales for Los Angeles County September 2009

Here are the trustee sales for Los Angeles County for September 2009. Trustee sales came in down 9.5% MoM and down 27.8% YoY. Third party activity is picking up as investors start figuring out the areas which have low inventory and they go and try to fill the gap.

Orange County Trustee sales for September 2009

Here are the trustee sales for Orange County for September 2009. Sales were down 8.8% MoM and down 34.1% YoY. Third party sales are incredibly high. I have a real hard time believing all of these pencil out from an investment standpoint but maybe the market is that hot in the OC. Since some of these areas are more affluent maybe buyers are just surpassing traditional buying avenues and buying themselves.

San Diego Trustee Sales September 2009

Here are the trustee sales for San Diego County for September 2009. Foreclosures were down 7.8% MoM and down 26.2% YoY. Third party sales are essentially flat the last three months.

San Diego Trustee Sales Mid-September 2009

Here are the trustee sales for San Diego for Mid-September 2009. We are halfway through the business days for the month and we are on pace for matching or slightly lower August 2009 pace. There is a slight mix-shift but relatively minor. So far any surge in the pace of foreclosures is not being seen.

Orange County Trustee sales for Mid-September 2009

Here are the trustee sales for Orange County for Mid-September 2009. Currently sales are on pace to come in slightly lower than August 2009. I remain impressed at the number of third party deals being grabbed. Anything that remotely pencils out (and I suspect a few which don't!) seems to be being grabbed at the courthouse steps.

Trustee Sales for Los Angeles County Mid-September 2009

Here are the trustee sales for Los Angeles county, Mid-September 2009. Los Angeles County is on pace to come in slightly lower than August. Third party sales are ticking up as investors figure out that the LA County area has many areas yet to be fully exploited by trustee sale investors.

Ventura County Trustee sales for Mid-September 2009

Here are the trustee sales for Ventura county for Mid-September 2009. Sales are roughly on pace to match the previous two months. Third party sales are increasing and will result in less motivated inventory on the market and lower sales and higher prices in the future. Looking at the upcoming calendar for the rest of the month scheduled sales appear a bit light so it would be of no surprise if trustee sales miss to the downside this month.

I have little doubt we will have a holiday foreclosure moratorium this year starting in late November and last through the beginning of January. If so it is highly unlikely we will see anything resembling a significant increase in foreclosures this year.

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 September 2008 home sales report

Septembers sales report is out for the San Fernando Valley. SFH sales came in at 658, down 1.20% from the month before and up 81.77% from the same month a year earlier. This "strength" in sales comes as median price fell to $392,500, down 7.65% from the month before and down 37.07% from the same month a year earlier. Last year at this time the full force of Countrywide and all other lenders switching over from a Wall Street model to a Fannie/Freddie/FHA model hit the market. Fannie and Freddie still had ultra loose guidelines and stated income available at that time. This is what ground sales to there lowest levels in history. Now with prices dramatically falling the best the market can muster is a month which is the third weakest showing for September in history.

Condo sales came in at 211, up 22.67% from the previous month and up 36.12% from the year before. Median price for condos fell 5.45% from the month before and are down 33.33% from the year before period. One thing to remember about condo supply is that it has greatly increased in the boom years and it will be hard to match the sales low of the 90's.

Total Pendings for September are at 1,305, their strongest month of the year. See my previous post regarding the large amount of fallout in the market as to why this might not be as strong of a sign as it would be in normal times. I think the elimination of FHA seller assisted down payment on Oct 1st (one of the last bastions of 100% financing) and all major mortgage insurers backing away from California financing greater than 90% will start affecting sales after this month (people still have locks on old loans and can close under the looser guidelines until those expire). I haven't even mentioned the local and national economic turmoil which is another issue entirely.

I'll give a forecast for October sales on November 2nd and will update pendings and inventory this weekend.

Back on Market..

I'm still struggling with the best way to represent that amount of homes falling out of escrow. The above graph represents the current months Back On Markets (BOM) divided by the average of the previous 3 months pendings. The number of properties going pending in September was the strongest month this year at 1305, no sign of a seasonal slowdown in that regard. This months number of BOM was also the largest number this year at 440. While we have seen an increase in pendings sequentially every month this year this hasn't translated directly into an increase in sales each month. It is looking like the fallout is winning the war.

If a seasonal slowdown does come the fallout ratio will spike and sales will fall even more dramatically than normal. If the seasonal slowdown doesn't come then one of two things will be happening 1) Housing is in recovery mode, not likely, but you'll be able to tell if this is true by watching prices firm up or 2) The lenders have stayed motivated to move inventory during the fall/winter months and you will see if this is true by watching prices plummet.

Update:

Here is the BOM as a percentage of the current months pendings (blue line) and as a percentage of the previous months pendings (red line).

Here is a chart of sales (orange) , pendings (green) and BOM (purple) over time.

Ventura County September 2008 Sales

September 2008 sales were 808 which is a 4.9% decrease from the previous month and increased 38.8% from September 2007. Median price was $385,000 down $15,000 (3.75%) from the previous month and down $160,500 (29.4%) from the previous year. This was the second worst September on record the "dramatic" sales increase is just in comparison to the span from September '07 to March '08 where the mortgage credit bubble popped and people had to start proving income. This caused a tremendous vacuum where sales dropped to never seen before levels and inventory climbed. We are now still in the adjustment period with prices, inventory and sales are struggling to find an equilibrium. Next spring season we should see slightly improved sales (March will be much better but the rest of the year shouldn't really knock peoples socks off), inventory should drop down to slightly elevated levels instead of the current high levels and prices will continue to fall.

I was relatively optimistic that 2009 could get very close to the bottom (close enough for those thinking to buy) as far as prices in Ventura. But with the passage of S.B. 1137 and delay it will cause foreclosures to come onto the market I think that will push off the "close enough" bottom to 2010 and the absolute bottom a couple years after that. Foreclosures and short sales will still drive the market but some of the pressure is relieved. I think the foreclosure peak is behind us, servicers will use this respite to perform triage and mod as many loans as they can get away with. Those that can't be saved will be allowed to short sale and if they refuse to work with the servicer, then foreclosed. This is merely my opinion and is backed up with no hard facts. I have heard some chatter regarding servicers (particularly Countrywide) working on an en masse mod program to be rolled out in December. Other servicers are working to get the option-arm reset loans off their books to mitigate that issue. Short sales will have the same pressure on the market as foreclosures but it won't show up in the official foreclosure numbers. This is one of the reasons why I think the foreclosure peak has passed, the servicers recognize that delaying the inevitable just will net them less. I am just not sure if borrowers will go the Short Sale route or choose the low-interest or principal reduction mod and that is why I am less optimistic as to next years sales being much higher or prices dropping as much as they have (percentage wise) in the last year.

San Fernando Valley September sales estimates

I'm a little late calculating my preliminary SFV numbers this month, SFH sales currently stand at 676 and a median of $399,000. Condo sales are 225 and median was $250,000, I think there is something up with that median though and using an estimate based on the average price I used $265,000 for the graph. Sales are up both MoM and YoY and prices were down MoM and YoY. Last year at this time the subprime and Alt-A markets abruptly disappeared and the market was left with Fannie/Freddie and FHA and that accounted for such a historic low in sales. Now that prices have fallen sales will look dramatically better when comparing YoY numbers but as you can see from the graphs they are very low historically. So when you hear how great the market is you can keep in mind the historic context and see that the market is still very sick and major price declines continue.