Thursday, January 25, 2007

Sacramento Area Foreclosures Explode: Up 1,273%; San Joaquin Breaks Record



From the Sacramento Bee:

The shake-out is on.

Hundreds of Sacramento-area homeowners who missed their first mortgage payments early last year fueled the region's most dramatic rise in home foreclosures since the 1990s during the fourth quarter of 2006, a property research firm said Wednesday.
...
La Jolla-based DataQuick Information Systems said 865 capital-area homeowners surrendered their houses to the bank in October, November and December -- nearly double the region's 450 third-quarter foreclosures.
...
The 865 fourth-quarter foreclosures compare to 63 the same time last year in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties. Analysts said Wednesday the sharp rise reflects both last year's historic lows and the sheer number of owners who overextended themselves to buy houses during the recent housing boom.

"What's the old saying? 'The chickens are coming home to roost,' " said John Arvanitis, president of Citrus Heights-based Sunrise Vista Mortgage Corp. Arvanitis called the foreclosure numbers "inevitable with the type of financing that most consumers were forced to accept to get into a house before they could no longer afford it."
...
Sacramento County reported 657 foreclosures during the last three months of 2006, the most since 703 during the second quarter of 1997. Placer County's 82 fourth-quarter foreclosures compared to a historic high of 90 in the second quarter of 1996. Both peaks marked the end of a housing bust in the region triggered by recession, job losses and military base closings.
Meanwhile, San Joaquin County just broke a record:
It was even worse in San Joaquin County, where default notices hit a record high. Some 1,293 homeowners received default notices, compared with 464 a year earlier. DataQuick statistics go back to January 1992.

San Joaquin County's increase in foreclosure notices is partly linked to speculators who are finding it difficult to sell homes in today's slowing market, said Renee Becker, a broker and vice president at Stockton-based Beck Realtors Inc.

"The market has turned, so maybe (speculators) have not been able to sell the homes," she said. "They are stuck with them."
...
Loans resetting to higher rates are likely playing a small role in the higher numbers of default notices, but "the main culprit here, by far, is the flattening out of home price appreciation across the state, and even some modest decline in home values in a few markets such as the Sacramento area," DataQuick analyst Andrew LePage said in an e-mail.
...
"When appreciation dries up, and certainly if depreciation sets in, it becomes very difficult if not impossible to refinance or take out a second loan, or convince family or friends to help you out," LePage said. "It takes longer to sell the house and it could be impossible to sell for enough to pay off the lender and cover any fees.
So in California, how many of these notices of default (NOD) actually resulted in foreclosure? Not many, until now:
While most homeowners are able to avoid foreclosure by getting current with their payments, refinancing or selling their home to pay off their loan, that is becoming harder as the market has cooled, according to the DataQuick report. About 32 percent of homeowners who got default notices earlier in 2006 ended up losing their homes to foreclosure the fourth quarter compared with 8 percent a year ago.
DataQuick's dqnews.com has more information on NODs for individual counties. The following shows the change in the number of notices from the prior year:
  • El Dorado: 237.3%
  • Placer: 262.4%
  • Sacramento: 127.0%
  • Yolo: 193.8%
This graph shows the number of notices sent out in Sacramento County since Q4 2004. Click to enlarge.



UPDATE: This graph has been updated to incorporate DataQuick's revised 2006 Q3 figure of 1,761. The original press release showed 1,388. In an e-mail, DataQuick confirmed that the figure printed in the Sacramento Bee is correct and that DataQuick had to revise the number "after a data update."

Calculated Risk has a graph of California NODs going back to 1992.

35 comments:

Max said...

Ah, but you forgot the good news:

DataQuick analyst John Karevoll said most homeowners who find themselves in trouble do so within 18 months of purchasing the home. The slowing rate of growth in default notices reflects an increasing number of loans moving beyond that time frame, Karevoll said.

He said the region "may have seen most of the surge it's going to have in (notices of) default activity."


Whew! Record NODs, record foreclosures. I was worried there for a second. Thanks, John, for convincing me that the worst is over.

drwende said...

Yeah, the Wall Street Journal once again declares the slump over this morning.

What's fascinating is that their evidence showing price declines and other bad signs is all real evidence -- statistics from stuff that's already happened -- but their evidence that the slump is over is all the hopes and unsupported opinions of people who have a vested interest in getting buyers out there and buying.

It's a great demonstration of why free flow of information doesn't prevent some people from being better investors than others (contra A Random Walk Down Wall Street)... if you believe the WSJ without putting on your critical thinking cap, you'll make some real howlers of investment decisions.

Perfect Storm said...

He said the region "may have seen most of the surge it's going to have in (notices of) default activity."

"May" Were not even close, we will beat the all time record foreclosure in Sacramento by a wide margin in 2007.

This guy John Karevoll is an REIC bitch.

Perfect Storm said...

2007-01-25: Summit Mortgage - Lending Subsidiary of Summit Financial group - (story)
They couldn't sell it, so they shut it down. More on the financials.

Another liar loan outfit takes a dirt nap, six feet under.

Anonymous said...

I'm confused...The Sac Bee article says:

"While foreclosure activity climbed sharply, statistics also showed the rate of growth in notices of default -- the first sign that homeowners are having trouble making their mortgage payments -- has slowed.

The region's 16 percent jump in default notices in the fourth quarter compared to a 25 percent jump the previous quarter -- and a 37 percent rise statewide."


Where did they find that the notices of default were slumping? The graph Lander posted shows what appears to be 1350 NOD's in Q3 and 1927 NOD's in Q4.

What am I missing here?

drwende said...

What you're missing is the difference between the number of default notices and the rate at which the number of default notices is increasing.

If you graphed what they're saying, you'd see the line rising, but it would be rising "flatter" in Q4 than in Q3. So if you were trying to predict a trend based on that information, you'd say, "Oh, look! Default notices are eventually going to level out! If the rate of increase drops 9 points each quarter, it'll be flat by Q4 2007. The slump is ending! Ding dong, the witch is dead!"

Trend lines often have brief plateaus, though. It's also possible that, just as home sales are evenly distributed throughout the year, the point at which owners get behind on payments is also not evenly distributed.

drwende said...

I can't type today -- "just as home sales are NOT evenly distributed throughout the year" is what I meant above. Sorry.

Anonymous said...

>>>>
"the main culprit here, by far, is the flattening out of home price appreciation across the state, and even some modest decline in home values in a few markets such as the Sacramento area," DataQuick analyst Andrew LePage said in an e-mail.
>>>>

Did anyone else notice how the recent decline in the market was categorized as a "MODEST DECLINE."

Makes me wonder if this is the new catch phrase is place of "soft landing." It sounds so gentle and easy.

I can just see realtors using it with clients. "Yes, there has been a MODEST decline, but the market has bottomed out and NOW is the time to buy." It rolls right off the tongue.

Anonymous said...

Something still isn't adding up for me. The Bee said the rate of growth is declining, but that's not what Lander's graph is showing.

NOD's:

Q1-1100
Q2-1325
Q3-1375
Q4-1927

The rate is increasing substantially from Q3-Q4. Am I interpreting this wrong?

drwende said...

Lander's graph doesn't match the table in the newspaper.

Lander's Q2 2006 looks like it shows the 1,352 default notices listed for Sacramento alone... then his Q3 increases just a tiny bit, not all the way to the 1,761 notices that the newspaper shows.

So one of the two sources made a typo in representing the data.

Anonymous said...

I think the new housing market is close to be bottomed. In Anatolia, JTS estate used to have 8 inventory home. JTS put down the price 790K -> 509K, 900K -> 640K etc, then, 5 of them sold. Builder now slowed their speed. (they are holding some of the house that already have the foundation down)
Now I see some of pre-foreclosure home in the market currently listing higher than what builder are offering.. But I don’t see another 5 years downturn. Maybe until next year after pre-foreclosure are gone. With this internet, all cycles are going somewhat faster than before.

Lander said...

The NODs in the graph are from dqnews.com not the Bee. Also note that they are for Sacramento County only (not the region).

According to the dq numbers, the change in NOD's is actually increasing (at least on a y-o-y basis).

Change in # of NODs YOY for Sac County only:
Q4 2006: 127%
Q3 2006: 99.1%
Q2 2006: 108.6%
Q1 2006: 48.9%
Q4 2005: 31.4%

It also looks like the change in NODs also increased in Q4 on a quarter-to-quarter basis for Sac County:

Q4 2006: 38.8%
Q3 2006: 2.7%

Not sure why there is a discrepancy. I may still be missing something or the info in the SacBee or dqnews is not correct. Keep in mind that stats on dqnews sometimes differ from those published by DataQuick in the SacBee (combined median for example).

Lander said...

I can barely read the chart, but it looks like the numbers match up except for Q3 2006.

Bee: 1,761
dq: 1,388

Could be a revised number (but that is a pretty big difference). I might have to e-mail Jim.

drwende said...

The chart is horrible, but yes, it's only Q3 2006 that doesn't match up.

The more I look at the Bee's numbers, the less sense they make. Their "25% jump" in Q3 and "16% jump" in Q4 are supposed to be region-wide, but if you total the 6-county data they provide, you get a 36% jump and a 20% jump, respectively. (Sacramento County alone is 30% and 9%.)

Using the Bee's numbers, you get a very different picture depending on where in the region you look. While Sacramento County's NOD rate was decelerating, El Dorado, Yolo, and Yuba counties were accelerating rapidly. There's an 86% jump in NODs from Q3 to Q4 in Yolo County.

RMB said...

The evidence of slowing in defaults is very misleading. A slowdown in the percentage rate of change does not indicate a slowdown in the number of defaults.
Example: Start with 100 defaults rising to 200 defaults = 100% increase. The next time around start with 200 defaults rising to 350 defaults = 75% increase. Is the rate of increase rising or falling. When you start with a small base (like 2004-5) it is easy to have large % increases. As this base number grows it is almost impossible to sustain the same percentages even as the raw number increases grow larger. People lie with statistics all the time and in this I believe is another case of statistics being used to paint an picture that does not reflect reality. The NOD are reaching record highs in a shorter time than ever before and show no sign of slowing down in the near future.

Anonymous said...
This comment has been removed by a blog administrator.
anon1137 said...

The data I watch on realtytrac.com also shows a deceleration in the number of NODs (called 'preforeclosure' on realtytrac) during 4Q2006, from about 1400 in the first part of Oct. to about 800 at the end of Dec. This data is for only the city of Sac, I believe - might be the county though. Despite this large % reduction in preforeclosures, the number going to auction has not changed that much, from about 450 in Oct to about 500 in Dec. I think this was mentioned in the Bee or DQ, that fewer homeowners are able to recover from the NOD phase lately.

Anonymous said...

The Pasadena-based parent of IndyMac Bank also said it has frozen all salaries, stopped hiring non-revenue-generating personnel, plans to outsource 50 percent more jobs by year end, and has established a "SWAT" team to improve performance.

Wow Indy Mac is cleaning house.

Gwynster said...

And yet I received this e-mailer from KB homes for yet another toxic home offer.

http://tinyurl.com/2zqbda
http://tinyurl.com/2fld4p

Big hint for you KB:
If you need to sell houses, try lowering the damn price. Crappy terms are sooooo 2004-2005.

Anonymous said...

Hey all,
I peruse John Lockwood's blog from time to time. I found this thread to be somewhat irresponsible, telling a buyer that they could expect 4% appreciation on a 250k SFR, with no money down, ARM. I think some landing readers might be able to offer more responsible advise, here is the thread (titled tips when buying a home):

http://www.sacramento-home.com/real-estate-events/2007/tips-when-buying-a-home_365.html

Sippn said...

gwynster - for most renters, the down payment is the problem.

regarding foreclosures - why was 2005 even as high as it was, only real dummies couldn't sell away from foreclosure then - then we would have a much larger increase %.

patient renter said...

"for most renters, the down payment is the problem."

Traditionally yes, but recently, not necessarily. Modern subprime, 100% financing, no-doc loans, etc., has shown that there's very little that can truly prevent almost anyone from getting a home if they want one. See Casey Serin.

patient renter said...

"I peruse John Lockwood's blog from time to time. I found this thread to be somewhat irresponsible, telling a buyer that they could expect 4% appreciation "

Jen Yee seems to have been speaking in hypothetical terms. BUT she did call 4% "very conservative" and failed to point out that any increase in value is unlikely to occur for a while, being that prices are going down. You could probably consider this irrisponsible, or simple lack of disclosure.

patient renter said...

...furthermore (to the above post) 4% could only be considered modest during a boom. Note to Jen: the boom is over. Traditionally 4% is average and of course in a downturn such as now, it's not to be expected.

Gwynster said...

Funny, I can afford the downpayment without blinking. It's the price it's self that stinks to high heaven.

Unless you put down a heluvha whopping payment, you won't get close to what rental costs are now. Or unless you go suicide loan, which still means you're renting short term with a nasty bk down the line.

Anyway you shape it, it still comes down to "it's the price stupid".

Sippn said...

Gwynster

You are the exception.

Thats why they advertise 0 down.

If you happy with rentals, why bother purchasing?

Cmyst said...

Heard a local Sacramento caller to the national Dave Ramsey radio show today -- he's a financial advisor who believes in paying off your debt, etc.
Caller was a Bay Area transplant, sounded young, female. She and hubby sold Bay Area home, came to Sacramento, put equity into *3* Sacto homes, bought a BMW and a 4x4 truck for hubby. I don't think they were renting the other two homes out, she didn't say....
Anyway, 3 years later she comes home to find an auction notice tacked to the front door of the home they actually lived in, and discovers that hubby (a "really hard working" Realtor and contractor, IOW, flipper)has been making the payments on all homes using credit cards, which are now 50K in debt and no more credit available. Hubby wants to declare bankruptcy; they lost all homes, still owe money on credit cards, lost all their equity. Somehow, they still manage to have savings and their vehicles are worth more than they owe on them, so Ramsey advises them to sell the vehicles and points out that bankruptcy won't save their vehicles or their bank account -- they need to liquidate and pay off the credit cards. According to the woman, their gross yearly income is 60K (and she's not working, and driving around in a new BMW). I'd love to know why they didn't attempt to sell the other homes long before now, or if hubby was trying to sell them for more than they paid and was just having no takers.
One couple, three foreclosures.

jeff said...

There's no compelling reason to buy in this market. Prices won't increase so why pay the taxes, the mello/roos, the HOA's etc. Bad financial move to buy. Plus the closing costs you piss away. You can rent hugh homes in Roseville and Lincoln for under $2K. I see 2BD apts for less than $1K. Good homes in good neighborhoods for $1200-1400. No other fees, they'll even pay to mow your lawn. Stay put.

Anonymous said...

CBOE 10-Year Treasury 49.04

Go baby go -yep

drwende said...

The renters who are financially responsible but can't afford a down payment mostly bought in 2002-2005, thanks to 100% financing and low-doc loans. The Minneapolis Federal Reserve did a report on it back in '05 or so. Landlords were shrieking because the "good" renters had bought and were out of the market, leaving them to choose among people who ritually slaughtered pigs in the parking lot versus people who invited their drug gangs over for keggers versus people who meant well but didn't make enough money working at Wal-Mart to cover anything close to market rent.

People like Gwyn or me genuinely are exceptions -- there are just a lot of us on the bubble blogs because it's our natural habitat. We rent a Midtown condo from an individual owner here in Phoenix because regular apartment complexes are horrible and rife with crime. A mini-mansion out in Surprise would have cost less per square foot, but that's "Surprise! Your 20-mile commute takes 90 minutes at rush hour!" as well as "Surprise! Your AC bill for July is more than your rent!"

Gwynster said...

Besides, wouldn't not putting down 20% mean that the monthly would be more, both in principle and interest?

The only thing that makes homes now "affordable" is having a huge downpayment. Take that away and even if you go the "buy the payment", homes are still out of reach.

I say these builders are just setting people up to fail.

Anonymous said...

Patient renter -
I aparently touched a nerve because John Lockwood told me to buzz off and closed the thread.

patient renter said...

Anonymous:

Yeah, he's in a tough situation. His income depends on selling something to people who would very often be better off not buying, in this current market.

Gwynster said...

I think some of the best parts of the article are the comments on the Bee. I think some of the posters are about to have coronaries. Happyrenter, are you still out there?

Lander said...

Thanks to the reader who pointed out the discrepancy in the Q3 data. Please read the updated post.