Q4 2006 Foreclosure Data Alert

[Jim Nickerson]

Re: Q4 2006 Foreclosure Data Alert

If I am understanding the data that EJ-Fred just put up, if 60,000 homes were sold across the US in 12/06, then 13% representing CA of that would be 7,800 homes sold in CA.

3,241 according to Sean went back to the lender in 12/2006.

I think that would be ~42% Houses Returned to Lender vs. Sold, whereas EJ-Fred's charts shows 1.6%. Where am I wrong, and I hate to be wrong in public?

[FRED]

Re: Q4 2006 Foreclosure Data Alert

If I am understanding the data that EJ-Fred just put up, if 60,000 homes were sold across the US in 12/06, then 13% representing CA of that would be 7,800 homes sold in CA.

3,241 according to Sean went back to the lender in 12/2006.

I think that would be ~42% Houses Returned to Lender vs. Sold, whereas EJ-Fred's charts shows 1.6%. Where am I wrong, and I hate to be wrong in public?

Posted an intermediate result. Make more sense now?

[Jim Nickerson]

Re: Q4 2006 Foreclosure Data Alert

Posted an intermediate result. Make more sense now?

I don't understand "an intermediate result," and it still does not make sense to me. Let me add that it is a helluva nice chart, but how is it correct?

[FRED]

Re: Q4 2006 Foreclosure Data Alert

I don't understand "an intermediate result," and it still does not make sense to me. Let me add that it is a helluva nice chart, but how is it correct?

It is a gosh darned sweet chart, ain't it. I do good chart! Thanks!

It says: total homes sold in CA declined from around 11k to 8k between aug and dec (census data for US @ 13% for CA), while homes returned to lender increased from about 500 to about 2500 (sean's CA data). The ratio, therefore, increased from 4% to 31%. If we go into jan, that number probably goes to 41% like you say, but the census bureau doesn't have it, so I didn't go into jan.

"Intermediate result" means my neighbor interrupted me and I made a boo boo.

[Jim Nickerson]

Re: Q4 2006 Foreclosure Data Alert

It is a gosh darned sweet chart, ain't it. I do good chart! Thanks!

It says: total homes sold in CA declined from around 11k to 8k between aug and dec (census data for US @ 13% for CA), while homes returned to lender increased from about 500 to about 2500 (sean's CA data). The ratio, therefore, increased from 4% to 31%. If we go into jan, that number probably goes to 41% like you say, but the census bureau doesn't have it, so I didn't go into jan.

"Intermediate result" means my neighbor interrupted me and I made a boo boo.

All right!! Now that is really a good looking chart in post #15, BUT in post # 11, Sean wrote

So maybe 500-600 properties went back to the lender for all of 2004, vs. 3,241 in December 2006.

So as not let up on hassling you, it still seems the chart is what I now understand as being "an intermediate result."

[SeanO]

Re: Q4 2006 Foreclosure Data Alert

Maybe this helps. Looking at the Dec 2006 Census Bureau data, Houses Sold in the US in the period were:

August 88000
September 83000
October 78000
November 72000
December 60000

Given that CA is about 13% of the US economy, according to the BEA, we get this:

Great chart Eric!!! Though I did find some CA home sale data from DataQuick that suggests it needs to be revised. Per a December 15, 2006 report, they say there were 39,200 homes sold in November. That likely dropped in December, just as it did nationally.

[Jim Nickerson]

Re: Q4 2006 Foreclosure Data Alert

First, as to when the market was going up, let's look at a DataQuick report from February 2005. That report said there were 56,125 notices of default filed in CA in 2004. It also states "only about ten percent of the homeowners in the default process actually lose their homes to foreclosure". From that we can estimate 5,612 homes were sold in 2004. Based on my experience buying foreclosures in 2004, I'd estimate that only 1 in 10 of those went back to the lender as investor competition was fierce at the auctions then. So maybe 500-600 properties went back to the lender for all of 2004, vs. 3,241 in December 2006.

From the article linked by Sean in the quote, "Only about ten percent of the homeowners in the default process actually lose their homes to foreclosure. Most are able to stop the foreclosure process by bringing their mortgage payments current, or by selling their home and paying the mortgage off. "

What this discussion so far is not taking into account, and I am not implying that it necessarily should provide an accounting, is the number of homeowners that upon receiving defalut notices from lenders might still be capable of selling their homes (presumably in the present times) at a loss that still allows individuals to pay off the loan from the sale proceeds plus some other monies they might come up with--family loans, selling the 2nd or 3rd car, or one of the boats, or the RV. Whereas this number of defaultees could get out of the default easier in say 2004 because housing prices were still rising, fewer apparently can do that now--thus the increases Sean is chronicling. But even if some can still escape repossession by banks by selling "toys" and the home at a loss or by selling "toys" and bringing the loan payments back to date, it suggests to me that there should also be an increasing number of homeowners who definitely end up much less wealthy than they were before becoming unable to meet the mortgage payment, thus with regard to the future they may be forced to cut back on further spending to lift the economy.

[SeanO]

Re: Q4 2006 Foreclosure Data Alert

What this discussion so far is not taking into account, and I am not implying that it necessarily should provide an accounting, is the number of homeowners that upon receiving defalut notices from lenders might still be capable of selling their homes (presumably in the present times) at a loss that still allows individuals to pay off the loan from the sale proceeds plus some other monies they might come up with--family loans, selling the 2nd or 3rd car, or one of the boats, or the RV.

A high percentage of the current foreclosures are 100% financing deals that were done 2005 or later.

Whereas this number of defautees could get out of the default easier in say 2004 because housing prices were still rising, fewer apparently can do that now--thus the increases Sean is chronicling.

Yes. I think that is a big part of it - the option of selling or refinancing is effectively gone for many. Another piece is that their is far less desire to work your way out when the house down the street is selling for less than they owe.

But even if some can still escape repossession by banks by selling "toys" and the home at a loss or by selling "toys" and bringing the loan payments back to date, it suggests to me that there should also be an increasing number of homeowners who definitely end up much less wealthy than they were before becoming unable to meet the mortgage payment, thus with regard to the future they may be forced to cut back on further spending to lift the economy.

Yes, but not everyone is facing foreclosure, so what impact on overall spending there will be is uncertain. Let's assume a)only 5% of homes are sold each year, b) some similiar percentage refinance each year, c) only a percentage of those did 80-100% financing, d) that anyone who purchased more than 2 years ago and hasn't refinanced still has equity, then we can come to the conclusion that a reasonable majority of the population still has equity that can be tapped to lift the economy.

I think the biggest implication of this thread is that the emerging default risk is not currently priced into rates. When it does get priced in it could cause a self-reinforcing cycle with increased rates hurting sales, lowering prices, putting more people underwater in their home, increasing defaults....

[FRED]

Re: Q4 2006 Foreclosure Data Alert

Sean, revised above using the dataquick data. Make more sense?

[russwinter]

Re: Q4 2006 Foreclosure Data Alert

Sean, I've picked up your item in the comment section of the blog post I've written on NovaStar and New Century, the End of Glory Days. Obviously that kind of acceleration in California FCs is a timebomb. The post linked here takes a hard look at NFI's and NEW's securitization credit performance, it ain't pretty.

[Rajiv]

Re: Q4 2006 Foreclosure Data Alert

I think Michael Hudson's articles on debt and interest should be required reading for this group. In particular, Road to Serfdom - An illustrated guide to the coming real estate collapse

[SeanO]

Re: Q4 2006 Foreclosure Data Alert

Just a quick note: Other foreclosure data sources are just starting to report December statistics. Note that most are reporting only 600-650 REO's (properties that go back to the lender) in December vs. the 2,431 I reported above. This is due to a difference in what is being reported, and demonstrates a lag that is prevelant in housing reports.

They are reporting the number of trustee's deeds that are filed at the county. This is the document that grants ownership of the house back to the lender. I'm reporting the number of properties actually sold at the courthouse steps, on the day it was sold.

The courthouse steps are a far more accurate and timely guage, as the filing of the deed is subject to delays at the trustee, lender, the county, and the services that gather the data from the county. As much of the data being reported on housing comes through the same process, this is a great example of just how far off reported stats can be.

Sean