I thought it was bad, but this bad in CA?

[c1ue]

The number of houses and condominiums sold in California plummeted 30 percent in January from a year earlier to 313,580, and the median price for an existing home dropped 22 percent to $430,370, according to the California Association of Realtors. The time it would take to deplete the supply of homes on the market at the current sales rate more than doubled to almost 17 months in January from a year earlier.
California had 481,392 foreclosure filings on properties last year, the most of any state, said Daren Blomquist, a spokesman for RealtyTrac. Stockton's metropolitan area had the second-highest U.S. foreclosure rate and Riverside-San Bernardino, Sacramento and Bakersfield ranked fourth, fifth and seventh, respectively.
In Sacramento, half of the city's current home sales involve bank-owned property, helping explain why the increase in property tax revenue will slow to 2 percent in fiscal 2008-2009 and may fall in 2010 and 2011, said Fehr, the finance director.

http://www.bloomberg.com/apps/news?p...d=a4BfFsSp0z08

500K foreclosure filings? If this number encompasses notices of default and what not, that might be more understandable, but if it means notices of sale then that's doomsday talk.

Median price down 22%? ouch if true.

Article also talks about real estate losses in CA alone being $630B - that's almost $17K per breathing body. More ouchies.

And this is the CA Association of Realtors.

If this is NAR-type shaded, then the reality is even worse?:eek::eek::eek:

[Slimprofits]

Re: I thought it was bad, but this bad in CA?

The amount of people that applied for and received no-doc and low-doc loans in NoCal is staggering....

[stealthcat]

Re: I thought it was bad, but this bad in CA?

"Bad" depends on one's point of view. For those who bid up the houses to unsustainable levels, yeah, it's bad. For those of us who attempted some measure of responsibility, who watched helplessly (priced-out!) as housing was bid up to astronomic prices, I find this rather refreshing.

That's what kills me about all the talk about the "credit crisis that *started* last August"...As far as I'm concerned, the credit crisis started ~2002, and *ENDED* in August, and we're finally starting to return to some measure of sanity.

I've seen little houses further out from the coast from where I live (rent) that are taking haircuts from $530k (2 years ago) down to $350k asking. I'm patiently awaiting the wave to work its way back toward the coast so that prices can have some rational relationship to local incomes.

[touchring]

Re: I thought it was bad, but this bad in CA?

So when is it goina end? I mean the new delinquancy and new foreclosures? Or at least when is it going to peak?

[FRED]

Re: I thought it was bad, but this bad in CA?

So when is it goina end? I mean the new delinquancy and new foreclosures? Or at least when is it going to peak?

All declines to date are asset inflation declines. The inflation was created by excess credit, in the for of ARMs when the Fed Funds rate was were close to 1% and LIBOR at 2.5%, driving mortgage rates, monthly payments, and thus home prices. Withdraw the credit and the prices decline. Barely half the ARMs made during that period have reset. The credit boom portion of the asset price inflation has a long way to go.

All that has occurred while the economy was growing and unemployment was either flat or falling. As of Jan. 2008, unemployment is rising in 58 of 58 counties in CA.

The ongoing asset price deflation will be amplified by falling incomes as the recession develops. This chart below shows the correlation between rising unemployment and falling housing prices in the past and projects the impact of rising unemployment going forward.

The unemployment situation in California is not yet as bad as in 1991 but will be considerably worse than in 1991 by the middle of 2009.

[touchring]

Re: I thought it was bad, but this bad in CA?

Thanks, this chart says that we are half way through first adjustment - only the first adjustments, and so implies there will be second and third adjustments as well?

[Andreuccio]

Re: I thought it was bad, but this bad in CA?

Fred,

I've heard reports of mortgages reseting recently to similar or even lower rates due to LIBOR being so low. Any sense of the effect this will have? Could it help to mitigate the damage?

[SeanO]

Re: I thought it was bad, but this bad in CA?

500K foreclosure filings? If this number encompasses notices of default and what not, that might be more understandable, but if it means notices of sale then that's doomsday talk.

"Foreclosure filings" is an utterly meaningless measure. Here are the details that you're looking for.

California Totals for 2007:

Notices of Default: 279191
(Starts foreclosure process)

Notices of Trustee Sale: 156744
(Sets Auction date and time)

Sales at Auction: 96880
(Game over, will result in Trustees Deed)

Value of loans sold at auction: $38.6B

Notices are per loan, per default, and do NOT indicate the number of properties. Sales tends to pretty closely resemble number of properties as it is fairly uncommon to have multiple loans on one property go all the way to this step, and the same loan typically can't be sold twice (unless sale was rescinded - again fairly rare).

Most of the loans sold at auction are 80% firsts, and a high percentage of those had 20% seconds behind them that were wiped out. I haven't done the research to find out exactly the value of seconds wiped out, but $8B is a good rough estimate. Since 19% is the average discount that banks are offering at auction now, assume at the very least another $8B in losses on the loans sold at auction (the property can be resold to recoup some of the loss). Values are still dropping and a lot of that inventory is not yet resold.

My guess on direct losses from California foreclosures completed in 2007 is $20-25B.


Finally note that while prices are certainly down - "median price" is even more useless measure than "total foreclosure filings". It is interesting in that it indicates the mix of whats selling, but means nothing for individual home prices. Early on the low end stopped selling and median price shifted up as only the high end was selling despite dropping prices. Now there are more loan programs at the low end, while jumbos have become ridiculously hard to get so the median is shifting down quickly. Interesting, but meaningless for determining lost value. Just to drive this home note that you could easily have median price go up 10% while ALL prices actually went down 20%, simply because the mix of what sold changed.

Check out our CA Foreclosure Reports here: http://www.foreclosureradar.com/CA-Foreclosure-Report.php

[FRED]

Re: I thought it was bad, but this bad in CA?

Fred,

I've heard reports of mortgages reseting recently to similar or even lower rates due to LIBOR being so low. Any sense of the effect this will have? Could it help to mitigate the damage?

There may be some getting done at lower rates but Crux of the crunch data show that is a minority case.

[c1ue]

Re: I thought it was bad, but this bad in CA?

SeanO,

Thanks for illuminating.

As I thought, the 500K number was a very poor job of edification.

However, a question:

From your historical data - how many homes with NODs are likely to make it through to actual default sales?

And are the historical statistical patterns changing? i.e. how much more/less the % of NODs wind up in default sale recently? Or for different home purchase vintages?

[grapejelly]

Re: I thought it was bad, but this bad in CA?

BTW, the second mortgages aren't "just wiped out." They have no equity anyway. But they can become unsecured general creditors of the borrowers and hound them for years just like a defaulted credit card debt. It's not the end of the world but it can be a hassle for borrowers who think they can just "walk away" but who have two mortgages and not just one.

[SeanO]

Re: I thought it was bad, but this bad in CA?

However, a question:

From your historical data - how many homes with NODs are likely to make it through to actual default sales?

And are the historical statistical patterns changing? i.e. how much more/less the % of NODs wind up in default sale recently? Or for different home purchase vintages?

That is research we are doing right now. We'll have the high level numbers available for everyone - by vintage and by lender we'll release later (we have some customers looking for informational advantage in this market).

Anecdotally, if you compare sales in January with notices of default from Sept (taking into account the typical lag) - it is now nearly 70%. And yes that is way up. More to come.

Sean

[SeanO]

Re: I thought it was bad, but this bad in CA?

BTW, the second mortgages aren't "just wiped out." They have no equity anyway. But they can become unsecured general creditors of the borrowers and hound them for years just like a defaulted credit card debt. It's not the end of the world but it can be a hassle for borrowers who think they can just "walk away" but who have two mortgages and not just one.

It's a great point for those who refi'd. Yes, the lenders interest in the property is wiped out, not >necessarily< the loan itself. But in CA the majority of these seconds were "purchase money" loans and in those cases the loan is wiped out in every sense of the word as they are by definition "non-recourse".

Sean