Banks Wising Up? Short Sales Increase [Housing Tracker]

Quote Of The Day 

“If you are selling on a street where there is a foreclosure or in a neighborhood where there are several foreclosures, you’ve got serious competitive problems because people say that house is 350, what makes this house 700? Well, it’s tough to give an answer, that this one isn’t coming out of foreclosure -- who cares? So I wouldn’t say the competitive situation has eased up.” - Robert I. Toll, Chairman of the Board and CEO, Toll Brothers homebuilder. (Toll Brothers F3Q08 Outlook Conference Call Transcript in Seeking Alpha, Aug. 13)

Foreclosure Data

Foreclosure Filings Rise in July As Credit Woes Continue. “RealtyTrac: Property foreclosure filings for July rose 8% from June and 55% from a year earlier… There were foreclosure filings on 272,171 properties last month, or one for every 464 households. Bank repossessions, or real-estate-owned properties (REOs), continued to be the fastest-growing segment... The number of REOs nearly tripled from July 2007, while default notices jumped 53% and auction notices rose 11%. RealtyTrac CEO James J. Saccacio: RealtyTrac now [has] more than 750,000 properties in its active REO database, or about 17% of the inventory of existing homes for sale.” (WSJ, Aug. 14)

Riverside County Foreclosures Edge Up. RealtyTrac: A total 8,272 mortgage default notices, auction sale notices and bank repossessions were recorded in Riverside County in July, 2% more than in June, and 123% more than in July 2007... The county held the fourth-highest rank in the state for foreclosure activity… For the eighth straight month, California ranked second in the nation in foreclosure volume, just behind Nevada and just ahead of Arizona.” (Sign on San Diego, Aug. 14)

Housing Prices Tumble in U.S. Cities on Bank Foreclosure Sales. “National Association of Realtors: The median price for a single-family home in the U.S. dropped 7.6% in Q2 as bank sales of foreclosed homes caused values to tumble in three-quarters of U.S. cities. The median was $206,500, down from $223,500 a year ago… Foreclosures and “short sales” …accounted for a third of all housing sales in the quarter. People who live near a home repossessed by a lender will see their property values drop an average of $5,000, according to the Center for Responsible Lending.” (Bloomberg, Aug. 14)

NY Foreclosures Up 44% In July. “RealtyTrac: Home foreclosure filings in New York increased 44% in July compared to a year ago. The number of homes in some stage of the foreclosure process was 6,167… New York ranked 30th on the list of foreclosure filings, based on a per-capita total of one foreclosure for every 1,282 housing units. The number of filings increased 15% compared to June of this year.”  (Albany Business Review, Aug. 14)

NJ Foreclosure Filings Rises 11.2 Percent. “RealtyTrac: Foreclosure filings in New Jersey rose 11.2% last month compared to July 2007… The increase was less than the national rate, where foreclosure notices jumped 55% from last July as the dramatic decline in the U.S. housing market continued. New Jersey ranked 19th among the states in foreclosure activity, with one filing for every 751 households. The national pace is one for every 464 households.” (Newsday, Aug. 14)

Dallas-Fort Worth Foreclosure Postings Rise 7%. “Foreclosure Listing Service: Only a 7% increase in foreclosures [in] the Dallas-Fort Worth area from a year ago. But more than 3,700 homes are scheduled for foreclosure sale in September… The biggest gain in September foreclosures is in Collin County, where the number of homes facing forced sale jumped 38% from a year ago. Foreclosure totals were unchanged in Dallas and Tarrant counties. The period ending with September's foreclosure auctions will be the second quarter in a row that total postings in the area have declined.” (Dallas News, Aug. 14)

Foreclosure Pain Rises. “Minneapolis Area Association of Realtors: The number of foreclosed and other bank-controlled homes on the market in the Twin Cities area has nearly doubled from last year, while the number of traditional listings has fallen 16%. The report focuses on homes in the Regional Multiple Listing Service that have been foreclosed or… “short sales.” More than 20% of all houses on the market in the metro area are foreclosures or short sales, up from a little more than 10% a year ago.” (Minnesota Star Tribune, Aug. 14)

Foreclosure Sales Dominate. Colorado: “Boulder economist Michael Kone: One out of every four previously owned homes purchased in the Denver area during the heart of the summer sales season was a foreclosure. And in Adams County, one out of every two homes closed from mid-June to the end of July was a foreclosure sold by a bank or other lender… The median price of a home sold in July was $229,200, down from $255,000 a year earlier, according to… Metrolist data. Much of the decline is based on foreclosures.” (Rocky Mountain News, Aug. 11) 

At Gillette, They Were Tackling Foreclosures.“Hundreds of homeowners from around New England, some with children in tow, waited in the midday sun outside Gillette Stadium shortly before 1 p.m. yesterday for the chance to meet face- to-face with a representative of their mortgage company in hopes of saving their home from foreclosure. By 5 p.m., the number of people who had registered for the foreclosure-prevention workshop had climbed into the "thousands," said Gillette Stadium spokesman Jeff Cournoyer, and organizers had decided to extend the workshop until 9:30 p.m… The free event -- organized by the New England Patriots Charitable Foundation and the Federal Reserve Bank of Boston -- was similar to others around the country.” (Providence Journal via Big Builder Online, Aug. 13)

 

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Comments

[fatcat:]

Judy,you are the master of deceptive titles..I had to look hard for any short-sell info in your article! Still,good stuff...

2008 Aug 15 07:22 AM

[SA Editor J...:]

Hi Fatcat,

Sorry if it wasn't clear, I try to choose a title that reflects an important trend that emerges from the often disparate, general real estate news, but maybe I should be choosing more general titles.
Something to think about-- thanks for the feedback.
- Judy

2008 Aug 15 07:44 AM

[eddie6442:]

Please explain why 1 foreclosure per 500 houses is a crisis. When has 1/500th of anything been a catastrophe?

2008 Aug 15 08:19 AM

[Pent up demand:]

If you consider that only ~4% of houses change hands in a year, it means that roughly 1 of every 20 homes on the market are in foreclosure. And that's looking at a national average. Obviously it will be much worse than that in some places. Sound like a crisis yet?

2008 Aug 15 08:38 AM

[kkin365:]

Judy, given that "short sale" has a special meaning in real-estate transactions, perhaps you should not use this term in your title. In this regard, I agree with fatcat's comment. Given that a reader's time, particularly before the market opens, is critical, a more specific title would help. Your post is valuable, particularly for me at the present time, since a close friend of ours is likely to have her house foreclosed, so trend presentation is relevant and useful. Thank you.
omooc

2008 Aug 15 09:03 AM

[fatcat:]

Judy,I wasn't really being critical,just having fun...I depend on your articles to get a good snapshot of this important nationwide issue...Thanks,again!

2008 Aug 15 09:53 AM

[billddrummer:]

Hi Judy,

Perhaps in a sense, 'short sale' could become a moniker for all title transfers involving bank negotiations. In that sense, foreclosure sales would be included under that definition. Look at it this way: If you agree to sell your house for less than you owe on it, that's a classic short sale because the bank participates in the negotiation and allows you to proceed with a sale, knowing that there will be some loss. If a bank takes your house through foreclosure and then sells it, that's a short sale too. The reason I say that is because when the bank repossesses the property, any existing equity is wiped out, the bid price is set by the lender (and nowadays the bid prices are set low enough to spark buyer interest) so the net effect is the same as if you did a classic short sale. The only difference is that the foreclosure intervenes.

Crisis will probably go down as one of the most overused words of the year. But in this case, it seems to fit.

Houses are selling. That's the good news. Prices are dropping faster than anyone thought possible. That's good news for buyers, bad news for sellers.

Values are fluid, and slipping nearly everywhere. Again, good for buyers, bad for sellers.

Inventory (months' supply) still isn't dropping, even though sales seem to be stabilizing (although when you look at the NAR spinmeisters, it's hard to believe much of what they say).

Mortgage financing, like every other kind of financing, is harder to get than a year ago. And that's bad for everyone.

And on another note--the most recent sales data for Northern NV showed a 78-month supply (6 1/2 years!!!) of homes for sale between $1 million and $2 million. Clearly, prices must (and will) fall.

2008 Aug 15 11:31 AM

[c smith:]

User 215110: Here is how 1/500 creates a crisis. CDOs with a 30/1 internal leverage structure are put on some bank's balance sheet and then levered again at 25 or 30 to one. 30 X 30 = 900/1 leverage. If the underlying asset fails at 1/500, and loss severity is high enough, you have a financial crisis.

2008 Aug 15 11:39 AM

[helplessobs...:]

Right now the banks are handling foreclosures the way they handled them in the past, i.e. throw the bums out. This approach will change as they find out 1. there is little market for their foreclosed homes, and 2. it is better to have someone living in the house than having it stand vacant. The new way is to let people stay in the homes where possible. Some will even pay these "new house sitters" as it will be cheaper than letting a nice home turn into a shack. Around here the bank turn off the electricity, this lets the basement flood and mold spores have a field day. With no heat this winter pipes freeze further damaging the property. It will take awhile but eventually the lenders will see things have changed for the foreseeable future.

2008 Aug 15 12:10 PM

[thecondoguy1:]

I would much rather have a house vacant and winterized then occupied by a family of angry people, they can do a significant amount of damage before they leave, you often don't think of less than zero, but leave a disinterested , unsupervised group in the property and I guarantee you, less then nothing, and a ton of liability, throw um out..............

2008 Aug 15 01:12 PM

[infracanino...:]

Perhaps a quick visit to the debtor in possession to evaluate the condition of the property, and if WELL kept, then try to renegotiate the loan would better benefit both parties..???? This approach would keep the property off their REO ledger and have some cash flow rather than a deteriorating property with no cash flow..???

2008 Aug 17 02:26 PM

[neeb??:]

If the pattern is that those who currently living in them maintain them then leave it/them alone. I seen a few empty places around here get turned into meth labs....

2008 Aug 17 07:11 PM