Sunday, March 11, 2007

'March of Death'

From the Sacramento Real Estate Statistics blog:

March 2007 is turning into a "March of Death" for flippers. Flippers in trouble now make up one out of nine MLS listings in Sacramento County...57% of all flipper listings are now in trouble, and the year is really just beginning.
From the OC Register:
Here's a look at estimates of subprime's clout in the home-purchase funding business in 331 major U.S. markets....Subprime lenders service borrowers with less-than-ideal financial profiles. This data is derived by LoanPerfomance's mortgage database that contains details on half of all subprime loans and 80 percent of traditional mortgages. Chart tracks 2006 estimates for average loan size by market and subprime's share of all purchase lending dollars in these markets.

[Ranking, Region, Subprime Share]
  • #1 Stockton-Lodi, CA: 41%
  • #3 Merced, CA: 41%
  • #4 Modesto, CA: 41%
  • #5 Bakersfield, CA: 36%
  • #9 Visalia-Tulare-Porterville, CA: 34%
  • #11 Fresno, CA: 32%
  • #18 Yuba City, CA: 29%
  • #22 Sacramento, CA: 27%
  • #38 Redding, CA: 24%


Sippn said...

OK nobody got enough sun this weekend.

Looking at the FIT site, a few listings and noticed that most I looked at were already foreclosed upon. So these are Bank sales (REO or repo) selling the home for somewhere near the loan value, usually the 1st at 80% sometimes the second at 90-97%.

What am I getting at? Well just the Sac county FIT number is about 900 - there are a total of about 900 homes for sale in Sac co for less that what was paid for them in the past 2 years, many or most of these foreclosures. While bigger than when the market was hot (easy to sell your way out of trouble) doesn't seem like a huge number for this market.

The median loan amount for sub prime in Sac was $218700 in the same chart as the 27% market share - don't know if these are 1st (not a large purchase) or 2nd loans.

Max said...

Oh, I made it out once or twice. Amazing what you can do with portable computers these days. :)

doesn't seem like a huge number for this market.

Since my resale data only goes back to 2003 or so, I can't give you an historical number. One in nine seems like a big number to me.

Using Agent Bubble's "distressed" numbers, you're looking at 20%+ listings. I don't think that's a good sign...

anon1137 said...

Max -

This OC Register article seems to support my contention that subprime has mostly financed lower-priced homes. Only 11% of borrowers in San Fran used subprime in 2006, compared to around 30-40% in the central valley. Also, Sippn's point about the median loan amount - pretty low overall. So the collapse of subprime will have the biggest affect on the entry level, first-time market.

Sippn - very interesting point, that most of the FITs now are actually foreclosure sales by banks, and not investors or fast-buck artists.

Cmyst said...

My take on it is that the poorest among us will fail the fastest.
And flippers, or anyone else for that matter, with homes in depressed areas will be much less likely to try to keep them.

The folks in the McMansions (and there will be some, who lost their lucrative jobs selling mortgages or are unable to sell homes or their investments tanked)who end up losing their homes still have more cushion to keep in them for lots longer than the poor folks.

The basic underlying reality has not changed. Homes are not affordable.
So, the marketplace will correct. Prices will drop, and demand will rise. It won't happen in a big way, overnight. But if it doesn't happen, then it will be a long wait for investors for buyers incomes to rise far enough to begin to buy again. Of course, if inflation takes off, our wages might rise a whole lot faster -- but then, the interest rates would keep us from buying. So, if you want to make a lot of money from real estate, you better pray to hold your asset for a very long time and let wages catch up to the price you want to charge for it.

Mark said...

I follow the Elk Grove market with hopes to buy in 1-3 years, after the bloodletting ends.

Just since February, the inventory has been growing (Ziprealty). I keep the following spreadsheet:

Date For Sale For Sale in Range Range-total Ratio Lowest Price
15-Feb 1207 135 11.18% $269,000
21-Feb 1216 133 10.94% $269,000
22-Feb 1222 138 11.29% $269,000
23-Feb 1215 134 11.03% $269,000
26-Feb 1229 142 11.55% $269,000
27-Feb 1231 144 11.70% $274,900
28-Feb 1230 141 11.46% $274,900
1-Mar 1228 139 11.32% $274,900
2-Mar 1236 142 11.49% $274,900
5-Mar 1231 141 11.45% $274,900
6-Mar 1229 140 11.39% $274,900
7-Mar 1237 143 11.56% $274,900
8-Mar 1256 149 11.86% $274,900
9-Mar 1253 149 11.89% $274,900
12-Mar 1272 159 12.50% $274,900

The "range" number is prices between 250K and 350K. Notice how the Elk Grove total has gone from 1207 to 1272 in less than a month. I have a feeling in June that number will be well over 1400.

Mark said...

Sorry about the data layout--

to further explain:

Columns are:

1. Date
2. Total Elk Grove Listings
3. listings in range (250-350K)
4. Percentage range to total
5. lowest price (in range) on market

these #'s all from ziprealty.

Anecdotally, a huge number of these homes are empty and/or short sales. Some of these homes were just bought a few months ago!! How does that even happen?

Gwynster said...

As soon as Davis and Woodland return to reality, I'll be looking at buying too. Damn UC just offered the DH a promotion so now we might stay - ugh.

Sippn said...

Well Gwynster, might have to take you up on that "splash" sometime. Congrats and luck.

Mark - 5% listing growth in the spring isn't much - typical... EG is a large market... builders are probably putting several times that number on the market monthly... heck they got at least one In and Out there.

Jeff said...

2 quick points/comments:
If subprime blowups are isolated mostly to the "low end" market because of inherent problems with that market getting their hands on cash, why is Toll Brothers (high end) getting killed as well in this market? I thought the rich don't care about market conditions? :)
Also, I noticed the FIT site for Placer Co used to be 2 1/2 pages long, it's now over 3 for the first time I've been tracking it...seems to me the number of FITs is growing in the area...
Side note: took my monthly trip out to Hillwood Loop, saw 22 empty/for sale homes. Amazing to think who/what is making the payments on those places each month. They have the blinds fully closed on all the home windows and I guess there are enough interested folks checking in on these vacant homes that JTS is having to place "Do Not Disturb - Owner Occupied" signs on the homes that look vacant but are not. But maybe it's a farce :) I checked in on some of the homes with 10-15 pizza advertisements stuck on the front doors and did see empty garages.

ralphk said...

I think the focus is primarily on subprime. I believe there's a hugh problem around the bend in Alt-A and HELOC'd prime.

It was all about perceived affordability. Subprime allowed lower income and/or those with bad credit to buy.

Option ARMS and interest only allowed those with higher incomes to purchase TOLL and other high end homes. Homes that in reality they truly couldn't afford.

peterbob said...

I watched "Flip that house" yesterday for the first time (I knew the basic premise from these blogs). The only interesting part is during the last twenty seconds of the show. The first episode took longer to complete and sell (after one sale went through) but when they taped it, I noticed they said the house "had a bid accepted." Wait, didn't that already happen? Yet the show still showed the "profit" for the flipper (it was appallingly low). How can they bank on the "profit" when it's not a confirmed sale?

The second episode showed the "profit" they would earn at the sellers wishing price, but after FOUR months, the house still didn't sell, and all the narrator said was that "they might not make any profit."

So let me get this straight. They broadcast a show about how much sweat and bullshit someone has to go through, and in the end, they don't get a sale and might lose money? Why is the LOSING money part relegated to the last twenty seconds of the show? No comments from the flippers? No sobbing or weeping?

Oh, and I would NEVER buy a "flipped" house. They people are amateurs. Awful workmanship. Just awful.

Sippn said...

Jeff - Toll blew it here before subprime was a problem - I'm seeing action at higher $ than Toll.

Sippn said...

Yea I can't believe Flip that house is still on.

Reminds me of when This Old House 20 years ago would spend $200-300K on homes - they'd blow the clients budget every time.

Thanks Bob V.

Jeff said...

That's a great TV show, I love seeing those people who know nothing about project mgt or remodeling homes sweat it out each month as no offers come in. But having to cut that check each month is the real fun as the heat turns up and they start blaming each other and the real estate agents, etc for their stupidity and greed. The only thing that sucks is sometimes by the end of the show the home isn't sold and I don't know whether or not they sold it!! :(

Gwynster said...

Want fun? Check out the HGTV message boards. Here is a recent post on sellers seeking advice on burying a St Joseph in the front lawn

Comedy doesn't get any better then this.

Cmyst said...

Gwen, are you Renn--- on those boards? Just curious because Renn-- sounds like she has some sense and you're right, most of the posters are unintentionally hilarious.

Gwynster said...

Nope. But there are also some other posters there that I'd swear were from Ben's blog.