Countrywide REOs Move Back to Early 2007 Levels

The Countrywide Foreclosure Blog reports that there are currently 7,017 foreclosed homes being offered for sale on the Bank of America/Countrywide website, down from the peak of 21,500 last November, and back to levels of April 2007 (see chart above, click to enlarge).

Below are charts for the individual states that had some of the worst foreclosure problems (CA, AZ, FL and NV), showing significantly reduced levels of lender-owned ((REO)) properties in June 2009. In all cases except Nevada, the REO levels are at two-year lows and Nevada foreclosures are close to a two-year low.

Comment: This is just one company - although Countrywide was (or still is) the largest mortgage company in the U.S. and financed 20% of home mortgages in 2006 - but doesn't this suggest that the real estate markets are slowly healing and recovering, and gradually returning to normal as the foreclosed properties are sold?

Comments

[Houston:]

With all the people out there that reject any signs of recovery, all I can say is "I dunno."

I went to the blog link and the graphs seem to be indicating that the average price of REO in all states shown but Nevada has levelled off.
That looks like a good sign to me. Bad news...values are way down and many people are trapped in mortgages. Good news....maybe the damage has bottomed out and now they can assess it's impact on them. Personally I think that the shadow market will bleed out into the market slowly because homeowner's that can pay their mtg will continue to wait for their price and some values are so low that there will not be a point in putting a house on the market for a long time. The choices for those folks will be, walk away or just pay the mtg, lead your life, and try to think about happier things. I went through the oil bust in Houston. I did exactly that for 20 years. Got a loan mod once and a re-fi later and just waited for the value to come up to what I owed and then sold.

Alt-A's...I don't have a clue.

Those assumptions are predicated on believeing what has happened

Jun 18 09:47 AM

[Houston:]

Last sentence correction:

All of my assumptions are predicating on believing what was published in this report.

Jun 18 09:49 AM

[donogrp:]

Bank REO supply is but one component of real estate for sale. What in practice has occurred is that (coupled with foreclosure moratoriums) servicers smartened up and realized that it costs them too much to manage REO. Short sales and loan modifications are far better and less expensive solutions. You'll have a better sense of a real estate market healing and recovery once the volume of notices of default decline (without the assistance of govt. mandated moratoriums), prices stop declining, and area employment stabilizes. As near as I can tell, we're not there, yet!

Jun 18 12:08 PM

[HardwoodFlo...:]

I'm concerned about the source fothe data. But this is, better news that 500K home builds, better news that affordability, better news than anything we have heard on housing todate.

Now if we could just create some buyers and sellers and if banks would lend some money for JUMBOs things would at least start to move again. Right now if it's not FHA backed Banks aren't doing the deals. The have no where to move a JUMBO even if the buyer is qualified...

Jun 18 12:29 PM

[rockerchic:]

Note the words 'listed for sale' which make all the difference here. There are many REOs that are not on the market (or taken into account here), but held up, they are 'not for sale' at this time. And these are not all loan reworks, many are vacant homes (I see many out there that are long vacant and nowhere listed). Agents are frustrated in the area I'm looking to buy because inventory is down but should be higher. There are many more REOs in total and one can't look at a fraction of them and say, 'look a recovery!'. Although the media does it all the time...

Jun 18 01:40 PM

[Houston:]

All of these comments have merit.

The only thing I'll add is that the average price of any facet of the home market going up or at least not going down is better than a power dive.

Jun 18 02:45 PM

[concrete guy:]

There likely is little or no shadow inventory in most of the smaller Midwestern markets. An example would be McLean County, Illinois; a market where I provide residential excavation and concrete construction services. The county is home to Bloomington-Normal and is the largest county in Illinois by land area. It had a grand total of 504 forclosures in all of 2008. The banks take them back, hire local builders to clean them up (an effort we often participate in) and sell them immediately. Since we have experienced very little home price depreciation in our market, they generally recover their principal balance, and often do far better than that.

All real estate is local. The smaller metros that escaped the worst excesses of the bubble are poised to turn or are turning.

Jun 18 03:25 PM

[mlonz:]

Due to foreclosure moratoriums, lots of title problems have emerged recently. This is hurting liquidity big time as sellers (Banks) cannot deliver clear title on many of the properties they "Own," and therefore not clear out the inventory. I will concede that we have probably seen peak # of distressed properties on the market, but there should still be a steady supply for many years making price reversals muted.

Jun 18 08:27 PM

[Seth Chalnick:]

go rockerchic! "Note the words 'listed for sale' which make all the difference here". You are seemingly the only person in the free world to recognize this small, yet gigantic omission.

Folks... there have not been any new foreclosures in like, 18 months (in the critical states like CA, FL, etc). There was a national moratorium, then state moratoriums in effect ever since the big recession year that has been swept under the rug... until now... via moratoriums, change in mark-to-market accounting practices, subsidized rates, media spin taking out of context half baked statistics like the one posted herein, etc.

What do you guys think has been happening in the last 18 months... fewer defaults? Slowing rate of defaults? There is a dam ready burst and the funny thing is the prime loans that have not yet re-set yet are starting to come due as we speak... and this basket of toxic assets is... no joke... around three times larger than the "subprime" basket.

If a measly little subrime correction brought the financial world to its knees, then how the hell can the whole world be smoking crack in unison right now saying that it was all inevitable... all that leverage... tsk tsk... and then not see this:

That we're about to see the correction START.

The ironic thing is that the one market segment (low end housing) where it potentially makes sense to buy right now... and where there is huge demand... is the one market segment where artificial short supply is killing a golden opportunity to stabilize at least one market segment bottom, stimulate the economy, and create jobs.

Jun 19 02:28 AM

[Seth Chalnick:]

donogrp you're absolutely right about getting a better sense of healing when nod's slow down... but I respectfully disagree about the loan mod's, at least as they have been handled thus far... and we can only hope that banks get with the short sale program, but as of yet, only about 15% of short-sales ever close.

As for loan mod's, more than half of the good citizens who have received mod's... are already back in default... and this statistic... is more than 8 months old! The reason is because the mod's have been given to people who have no incentive to pay perfectly good money on a depreciating asset since they have no good credit profile left to defend.

The mod's should have been going to the folks who have never missed a payment... but these folks... the ones who played by the rules... don't qualify.

In the case of both mod's and short sales, the unfortunate truth of the matter is that individual incentives of bank managers are not in alignment with what it will take for a broader economic recovery.

Jun 19 02:41 AM

[Jimmy K:]

Dear Lord Seth...!!! I agree with both comments you just posted.... I am amazed by any mention of housing recovery- when all you see are empty homes EVERYWHERE... if you look for them; you'll find them....

Jun 19 01:57 PM