John Berry: Homebuying Binge on East Coast, Too

John Berry notes that in Prince William County, Virginia, which has been especially hard-hit by the housing meltdown, more homes sold last month than in any September on record. In Riverside County, California, near ground zero of California’s housing crackup, September sales were double last year’s. And as we noted here earlier this week, home sales in Orange County, California rose by 62% in September, to their highest level since December, 2006. In all cases, the bulk of these sales were foreclosed homes. Berry takes this is a sign that, at last, the market is working through the housing glut, even without any help from Sheila Bair:

The assumption that the wave of foreclosures is going to keep driving prices down is wrong. The big jump in sales suggests that prices may have hit bottom already in some areas. There are even tales of multiple offers on foreclosed properties, with buyers paying more than the asking price.

Prices “may have hit bottom? Those aren’t words you read very often lately. Maybe he was being hyperbolic, for effect. In any event, it shouldn’t be hard to understand how it is that some properties are drawing multiple offers. In many of these markets, prices are down by 50% or more from their peaks. . .

Comments

[t-bird:]

Afraid the author does not see or understand that the de-leveraging in all areas of the economy will affect prices for many years to come.

Home prices may return to the levels not seen since the late 80's or early 90's. Especially, since the average home purchaser will not be able to qualify under the new lending parameters.

2008 Oct 26 09:28 AM

[vreporter:]

There is nothing bullish about foreclosures accelerating now rather than a year earlier. We are simply in the time window where such inventory arriving over six months ago is packaged for reduction. Secondly, the banks now have to focus on other revenue activities and the Treasury backup gives them the ability to begin that lengthy process.

Home prices have not bottomed and they will not return to such levels for years to come. The reduction of inventory still lingers despite the foreclosure component - a very small positive sign.

2008 Oct 26 10:30 AM

[nym:]

In California September is thought to have been exceptional because of a new rule requiring 30 days notice of intent to foreclose.

2008 Oct 26 11:08 AM

[kotika98:]

John Berry is usually not a very good read, but that article is spot on! It makes basic sense, the facts are self evodent, and as in every other market the volume matters more than the price. Thats because volume cannot be faked, while prices can easily be. For example throughout 2007 homebuilders were giving huge discounts but masking them as some sort of gifts etc... then reporting a bogus inflated prices as the actual sale price. This was masking the extent of the decline, actually if you believed those numbers there was not much of a decline, only that there was no volume. But this foreclosure volume is real, and moreover people are so convinced of a good bargain that they are probably buying with cash. Now thats a REAL datapoint.

2008 Oct 26 11:29 AM

[notsosmart:]

here in stamford ct(tdays local paper) foreclosures higher than ever & rising.not counting unadvertised short sales.this is lower fairfield county.one of the wealthiest.a first time homebuyer with cash is in the drivers seat until they lose their job.i cant prove it but i guess unemployment has got to be aroung 11-12%.i never believe this govt. about anything.those that dont have cash or a healthy down payment may find getting a mortgage difficult.

2008 Oct 26 11:44 AM

[Griz:]

I just can't wait to pick-up a $1M home (at 2007 valuation levels) in the OC for $350K, what it truely should be worth. As de-leveraging across all asset classes accelerates, Sept's foreclosure clearance sale will be regarded as a premature stop on our way all the way down to bottom (i.e. 2/3 reduction of housing values from peak to trough).

2008 Oct 26 12:40 PM

[Joyful Alte...:]

Real estate sales around here are "investment properties," often short sales for landlords who can't refi or wannabe flippers who wanna give up.

Potential homebuyers are too scared or too greedy or, mostly, they have to sell their house first.

2008 Oct 26 01:44 PM

[lasvegasrea...:]

It's no tale that multiple offers are coming in on Bank Owned Las Vegas Homes. Some areas have had prices remain steady for the past 6 months suggesting a bottom. Las Vegas has for the most part, already gone through a major correction through natural forces which IMO is far healthier then delaying it out for areas lagging behind in the correction process.

The biggest help we need is for banks to approve short sales so the homes don't go to foreclosure in the first place.

2008 Oct 26 03:53 PM

[fixed incom...:]

Mr. Berry's article was excellent. One of his most important points was that each loan is an individual contract with unique borrower and lender motivations. It is naive to think that a govt sponsored one-size-fits all fix will be effective.

My understanding of the market and the foreclosure process:

The foreclosure process is driven by the lender, excercising their contractual rights in response to a borrower's failure to perform.

In many cases servicers have the ability to modify loans where it is in the best interest of the lender / investor. Perhaps they choose not to because it does not serve the lender's interest. Why would we second guess this choice? Are we comfortable negating or delaying the enforcement of contracts? Why? because it's someone else's property/collateral?

Mortgage lending is unique insofar as many rights are bestowed to homeowner/borrowers that do not exist in other lending arrangements. This includes a protracted time period to redeem the outstanding balance after non-payment. The lender's ultimate defense is the right to take possession of the collateral and foreclose after the time period expires. Why do we wish to deny them this leverage?

I do not see how any investor will regain confidence in lending if govt tries to drive the market in some populist direction or limit the contractual rights of lenders.

2008 Oct 28 10:19 PM