April Foreclosure Data

Submitted by Rich Toscano on May 12, 2008 - 11:35pm

April was another record-setting month for both NODs and NOTs:

The following long-term graph, adjusted for changes in the size of San Diego's labor force, shows that the 1990s bust was a comparative walk in the park foreclosure-wise:

Given the recent spikes in NOD incidence, we should look for a big move up in NOTs real soon now.

Last week I noted that overall resale inventory is not growing very quickly, but these numbers would suggest that inventory of the must-sell variety continues to really pile up fast.

(category: )

Submitted by gdcox on May 13, 2008 - 1:21am.

Must sell to stock is surely critical

Submitted by Bugs on May 13, 2008 - 7:47am.

One thing I noticed is that the MLS reported 1550 sales of detached homes in 04/2007, and 1470 sales in 04/2008. Earlier months this year were down by 20% - 30% compared to 2007, so when April 2008 catches up to within 5% of April 2007 that's a pretty dramatic shift in volume.

Looks like we're having (at least) a Spring selling season this year.

Submitted by sdrealtor on May 13, 2008 - 8:15am.

Or perhaps we are actually approaching the bottom . In terms of volume that is.

Submitted by LV Renter on May 13, 2008 - 8:53am.

This reminds me of one of my favorite quotes made by John Karevoll in the LA Times when foreclosures had finally increased above their average rate for the last 20 years.

"I'm not convinced the numbers are going to continue going up at this rate, unless something major happens to the economy."

John Karevoll quote in the LA Times October 19, 2006

Of course most in the REIC are quick to point out we are not in recession or will only go into a mild recession. Imagine if something major happens in the economy ;)

Submitted by garysears on May 13, 2008 - 8:54am.

I've been wondering where all the bank owned inventory is. If I go to www.realtytrac.com and put in the zip codes for some of the harder hit areas, there seems to be more bank owned properties out there than total inventory listed on the MLS. Anyone else notice this? Take a look at Spring Valley or Encanto. This assumed "hidden" inventory is the primary reason I think the better deals are still a ways off.

I have also noticed while driving around that there are a lot of bank owned properties not listed on the MLS. I take that to mean banks are trying to disguise the true number of foreclosures. It could also mean the banks are quick to put up a sign, but slow to list on the MLS.

Submitted by pencilneck on May 13, 2008 - 8:58am.

04/2007 1550 sales 604 Trustee's Deeds
04/2008 1470 sales 1512 Trustee's Deeds

When you take trustee's deeds into consideration, April home sales don't look as great when you compare Aprils 2007 and 2008. This could possibly be a bottom in terms of volume (I don't think so but won't argue it either way), but prices can't possibly stabalized until we have more sales than highly motivated sellers.

http://www.foreclosureforum.com/stats.html

Submitted by cr on May 13, 2008 - 10:34am.

Volume may pick up but how many months of inventory are there compared to last year? Could volume be rising only as a result of higher inventories and more competitive prices?

And what about non must-sell inventory? Won't that pick up in the summer for those preempting their ARM resets, those whose ARMs already reset and planned on selling all along, and those who just want to move?

Heading into the high season I guess the question is then will there be more buyers coming off the sidelines or new inventory? Given the lending market, job market, inflation, and consumer confidence, I have to say the latter.

Submitted by CricketOnTheHearth on May 13, 2008 - 5:35pm.

RB condos appear to be dropping rapidly now.

A mere 4 months ago I sent a sad email to Robert Campbell saying, "nothing's going down in price here yet!" I was pretty premature.

Looking around on Realtor.com listings yesterday, there are a lot of 2br condos in 92127 and 92128 going for the low 200's. These were in the low-to-mid 300's just two years ago. My coworker showed me a price sheet from a local condo-converted complex who are offering 500+ sf 1BRs for $175,000 or so.

Another interesting thing I noticed is that lots of the condos on Realtor.com seem to be listed as "single family homes". But you can tell pretty quick from the description they are not standalone houses on their own lots. I chalk it up to more desperate realtor hocus-pocus.

cooprider14, to me, people who are trying to sell one step ahead of their ARM resetting are "must-sell". My former landlady was one of these in 2006. Luckily for her, she was able to sell at the aforementioned low-$300K price. Unluckily for me, I am now a somewhat more JBR than before, due to not finding as good a deal to live in as her condo was... but I am saving up and hoping to find a good deal to buy for myself later.

One final note on condos. When I moved here during the 1994-6 bust, somebody told me then at that time, "don't buy a condo, you just can't sell them." I wonder if condos will turn to kryptonite at the bottom of this downturn too.

>chirp<

Submitted by Huckleberry on May 13, 2008 - 6:00pm.

Has anyone else seen Mr. Mortgage's videos on YouTube?

Here is a link to his newest foreclosure analysis (April Foreclosure Report) from ForeclosureRadar.com.
http://www.youtube.com/watch?v=LCW4A0ACDKM

Here is a link to all of his video analysis of the mortgage market.
http://www.youtube.com/profile_videos?us...

This guy is awesome, a must see!

Rich, let us know what you think after watching these...

Submitted by SD Realtor on May 13, 2008 - 11:22pm.

"I have also noticed while driving around that there are a lot of bank owned properties not listed on the MLS. I take that to mean banks are trying to disguise the true number of foreclosures. It could also mean the banks are quick to put up a sign, but slow to list on the MLS."

Typically if you see a sign but that the home is not on the MLS it means that the home has not been priced yet. Think about it, if you see a Prudential sign on a home but that home is not on the MLS the bank has nothing to do with the way Prudential markets the home. Prudential simply doesn't market it on the MLS until the bank gives them the sales price. For these properties you see, call the agent on the sign and ask them why it is not yet on the MLS, don't make assumptions. The agent will most likely take your name and tell you they will call you when it does get priced but don't take thier word for it. Be diligent and continue to call. Anyways I have seen cases of the sign being up for a few weeks before the pricing came in. This lets the agent also get some prepricing interest.

As far as this being a bottom in terms of sales volume I think it is a muddied picture. I think the sales volumes are dominated by the regions that took the bigger hits over the past 1-2 years. I will concede that some of the desireable areas had quite robust springs but I do think that was more cyclical in nature. Still it is hard for me to believe we have bottomed out in the sales volume decline.

I will also say that I am becoming more and more concerned of what I think will be a second wave that will hit the more desireable areas but it will be later then I have been hoping for. This to me seems to be true for both volume and pricing. We may see some flat to downward movement through the rest of this year with another robust spring in 09. Then in the fall/winter of 09 we should start seeing the second wave of distress that could be coupled with higher interest rates. This will last about 2 years and should bottom out and abate in 2012. Maybe I am overly paranoid...

SD Realtor

Submitted by CA renter on May 14, 2008 - 2:48am.

I concur with your last paragraph, SD Realtor.

Going out on a limb here, but am also guessing we are at or near the bottom in sales volume...BUT I don't think prices are anywhere near the bottom, except in some very rare instances.

Can't find a link right now, but we've heard about sales volumes being the "lowest since 1996" or even "lowest in history" in many cases. Sales volume will pick up when prices start to make better sense, and we are already seeing that happen in some of the lower-tier areas that have seen ~50% declines.

Sales volume peaked in SD in 2003 (2004 had a stronger spring, but the momentum shifted in summer of '04). Prices still went up in many places until about Q3 2005. I don't expect prices to follow volume that quickly, and don't think we'll see a "safe" bottom in prices until about 2012.

Of course, if the govt gets involved, expect the recession/depression to last much longer and get much deeper, as they spend our tax money trying to forestall the inevitable price declines.

BTW, it looks like I'm starting to see an acceleration in price declines in only the last month or so (watching some parts of LA and SD). It's getting interesting...

Submitted by AN on May 14, 2008 - 9:32am.

Of course, if the govt gets involved, expect the recession/depression to last much longer and get much deeper, as they spend our tax money trying to forestall the inevitable price declines.

I have to disagree with this statement. If the government gets involved more than they have been, which I think they will if things get worse, we'll more likely see massive inflation rather than recession/depression. After all, our Fed chairman is known to be a recession/depression hawk rather than an inflation hawk. Add in the fact that if Democrats control all 3 houses, we'll see even larger bailouts if doodoo hit the fan. Although we're definitely slowing down right now, data is not clear about a recession yet. This, I think is due to the government intervention.

Submitted by sd_matt on May 14, 2008 - 12:32pm.

I'm not clear what inflation could do in this situation but exacerbate a recession. Of course this is not my area of expertise.

Submitted by AN on May 14, 2008 - 1:00pm.

The way I see it is, with inflation, salary usually go up too. If salary doesn't go up and no new job growth, then we would have stagflation, which is much worse, I think. If the $ gets weak enough, we might rival India as cheap labor, which would cause company to hire people here instead of India.

Submitted by cr on May 14, 2008 - 3:22pm.

That seems logical but during the economic growth of 2000 to 2006 wages were flat. When you consider that and the coming recession it doesn't look good for wages, particularly with our trade deficit. The only places wages are going up are China and India. Still, it will be a very long time before labor here is cheaper.

From what I found India's min wage is about $3 a day, about the same as China.

Submitted by FormerSanDiegan on May 14, 2008 - 3:49pm.

That seems logical but during the economic growth of 2000 to 2006 wages were flat.

WRONG !

This is repeated so often that people actually believe it.
But it is simply not true.

Here's the facts for San Diego ...

2000 to 2006 median income growth

Household: 26.6%
Family: 29.3%

Per capita income growth: 25.5 %

All that in a period where cumulative inflation was less than 18%.

So, in both nominal and real terms, income growth was significant in the 2000-2006 period.

Submitted by AN on May 14, 2008 - 3:53pm.

Cost in wage is only part of the cost in outsourcing. There are other fixed cost, like lost in productivity due to time difference, infrastructure, administrative, etc. Then, if the government start to intervene and put tariffs and such to keep jobs here, it might make more sense for large company to keep jobs here. I don't know if this will happen, but there's always a chance.

I'm not sure if I completely believe the argument that wages were flat between 2000-2006. I know in 2002, a fresh grad engineer would make around $45-50k/yr. Now, they're making $55-60k/yr.

Submitted by CA renter on May 14, 2008 - 4:27pm.

AN,

I'm voting for stagflation, which has probably been the case for decades. Wages have gone up, but not as much as **real** inflation (couldn't care less about TVs, electronic gadgets, etc. -- concerned more about housing costs, food, energy, autos, medical care, education, etc. as a percentage of income) over the past couple of decades.

Globalization is a strong deflationary force, especially when the main purpose of our "globalization" is wage arbitrage. The credit market has made up for the slack in wage increases, and this is where our massive inflation has come from, IMHO.

There's certainly a lot of energy behind the isolationist movement, but it remains to be seen how/when/if that plays out. Could be good if done right, but bad if done wrong.

Until real wages for J6 go up significantly, a recession (or worse) looks most likely to me.

Submitted by FormerSanDiegan on May 14, 2008 - 4:37pm.

I'm not sure if I completely believe the argument that wages were flat between 2000-2006. I know in 2002, a fresh grad engineer would make around $45-50k/yr. Now, they're making $55-60k/yr.

You are correct. Your observation of about 22% age increase jives with the census numbers in terms of income growth in my previous post.

San Diego saw nominal income growth in the range of 4-5% in the 2000-2006 period, and real income growth above 1%. My guess is that it has deteriorated some in the past 18 months as is typical in recessionary periods.

Submitted by paranoid on May 14, 2008 - 11:38pm.

FSD: I guess you are using the official CPI. Do you know that there is a shadow CPI that tracks the inflation rate using the un-tricked formula?

The official CPI today says that the energy price has DECREASED in april. Refer to http://globaleconomicanalysis.blogspot.com/

I only hope the official CPI is true!

Submitted by cr on May 15, 2008 - 10:42am.

FSD - I was speaking from everything I read that says wages are down, and national more than specific industries or markets, but looking exclusively at SD the BLS shows a median of $45,210 for 2006 and $38,200 for 2000. That's about 18% over 6 years or ~3%/yr. So using your 18% inflation for '00-'06 wages are flat.

Using the BLS inflation calculator $38k in 2000 is worth $44,722.99 in 2006, a difference of $500, and that's as paranoid said, if you buy the CPI.

Based on that approx 3%/yr inflation I think it's safe to say the CPI is understating true inflation, and that after actual inflation incomes are down.

Submitted by AN on May 15, 2008 - 11:08am.

Lets assume that inflation is 3%, if a house is worth $200k in 2000 with interest rate at ~8%, then today, with rates at ~5.75% and adding in 3% inflation for 8 years, that same house would be considered flat @ $320k. In real life example, a starter 3bed/2bath house in MM was around ~200k in 2000, those are around $320-370k right now. So if wage is really flat, I guess housing in MM is near flat too the last 8 years after the last 2-3 years of decline.

Submitted by JWM in SD on May 15, 2008 - 2:11pm.

Oh god, not the wage inflation debate again. Look, here is the problem with most of the posts here about this subject. A good number of the posters here are engineers (software, mechanical, design, manufacturinig, or otherwise) who really are not representative of the population in general because their wages tend to skew higher. Wages for the majority of the population have not gone up and will not go up in hyperinflation. There would be mass layoffs across the board and especially for white collar employees including engineers. If a business cannot project its' costs at least one year out due to inflationary concerns, then there are big problems that inevitably lead to layoffs. Without exception.

This is just more of the drivel about inflating debt away. It's not going to happen unless the FED is willing to completely trash currency and willingly abdicate their primary source of power.

Submitted by AN on May 15, 2008 - 2:57pm.

Wages for the majority of the population have not gone up and will not go up in hyperinflation.
You can't have hyperinflation w/out wage inflation. What you speak of is stagflation.

It's not going to happen unless the FED is willing to completely trash currency and willingly abdicate their primary source of power.
Their policy for the last few years haven't convinced you yet that the strength of the $ is not on the top of their list?

Submitted by cr on May 15, 2008 - 3:35pm.

Hyperstagflation?

Who wants to add it to Wikipedia?

A period of economic contraction and flat or falling wages during which prices for everything skyrocket while the powers that be erode the value of the dollar to make everyone think everyone will be okay and simulatneously undermine the savings of responsible taxpayers, renters, and senior citizens, in a concerted effort with uninformed politicians to hand out aid to those unwilling to read a mortgage application, and who were hornswaggled into buying a house they couldn't afford.

Submitted by JWM in SD on May 15, 2008 - 3:36pm.

"You can't have hyperinflation w/out wage inflation. What you speak of is stagflation."

As far as I'm concerned, there is no such thing as stagflation. Look up Weimer Republic and Hitlers rise to power. Also, when there is true hyperinflation inputs for business costs become unpredictable and result in wage arbitration and layoffs. As someone who has been preparing budgets and cashflow projections for manufacturing companies for ten plus years, I can tell you that never want to have your raw input costs become unpredictable like that.

"Their policy for the last few years haven't convinced you yet that the strength of the $ is not on the top of their list?"

Bernanke is doing his best to ameliorate the effects of asset price deflation and credit contraction with the treasury swaps and other facilities, but they are not really printing money. Not yet at least. He is doing everything just short of that. Ultimately, he cannot stop a net deflation though.

Submitted by AN on May 15, 2008 - 4:18pm.

Look up Weimer Republic and Hitlers rise to power.
Thanks for pointing me to this era. Here's the wiki link to hyperinflation: http://en.wikipedia.org/wiki/Hyperinflation

Here's an excerpt "During the first half of 1922 the mark stabilized at about 320 Marks per Dollar accompanied by international reparations conferences including one in June 1922 organized by U.S. banker J. P. Morgan. When these meetings produced no workable solution, the inflation changed to hyperinflation and the Mark fell to 8000 Marks per Dollar by December 1922. The cost of living index was 41 in June 1922 and 685 in December, an increase of more than 16 times."

If you noticed, there was a wage inflation, but it wasn't inflating as fast as everything else.

Submitted by Michelle Steffes on May 19, 2008 - 9:55am.

Michelle Steffes

Don't forget to add the bailouts for the people who loaned the money!

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