Tuesday, April 17, 2007

Sacramento Housing Market - Notices of Default



FYI - The graph incorporates revised figures for Q3 and Q4 of 2006.

January's Sacramento Bee foreclosure story included this blurb by DataQuick's John Karevoll:

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."
So what was this "slowing rate of growth" Karevoll thought significant? For Sacramento County, default notices had increased 153% in the third quarter versus the prior year, while the fourth quarter showed a mere 127% annual rise to 1,927 notices. However, with the most recent report, we learn that the fourth quarter figure was upwardly revised to 2,635, an increase of over 700 notices! So apparently the rate of annual growth actually increased from 127% (Q3) to 210% (Q4). But not to worry, since the most recent increase was a mere 185% (for now).

16 comments:

Bakersfield Bubble said...

Aegis Lending Corp. shut its Sacramento lending office on April 6 letting about 25 employees go. The move by the Houston-based company was part of an overall repositioning of the company, said a company spokesman.


http://sacramento.bizjournals.com/sacramento/stories/2007/04/16/daily25.html

Diggin Deeper said...

"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."

This is really an ugly graph! Foreclosures could dampen sales figures in the coming months dumping distressed properties on a market as inventories continue to grow. Imho, this will affect prices in every neighborhood, community, or enclave in Sacramento. And what may be most interesting of all is that we are set to break all records for foreclosures in this city and throughout the state...and we're just getting warmed up as far as resets go.

A recent blog, here, found that less than 10% of these bank owned homes are sold at auction and end up back in the bank's inventory. The only reason I can figure is that the starting prices at auction remain too high and will have to be cut in order to move them off the books. The only other possibility is that the buyers have just shut down and will not move until they see some signs of life.

I don't know how the real estate people will spin this problem, but one can safely assume its a sunny day through their eyes.

Gwynster said...

I called CW to look into a pre-approval letter. After going through the process, I can say they are tightening a little bit.

Maybe the pool of available buyers is shrinking but if the small amount of tightening is what is holding potential buyers back, then the area has some real problems.

Max said...

I don't know how the real estate people will spin this problem, but one can safely assume its a sunny day through their eyes.

I saw a good summary of the Dataquick spin on a Calculated Risk comment:

10/18/06
Most homeowners emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. Still, about 19 percent of homeowners who found themselves in default earlier in the year actually lost their homes to foreclosure in the third quarter. A year ago it was six percent

1/24/07:
Most homeowners emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. Still, about 32 percent of homeowners who found themselves in default earlier in the year actually lost their homes to foreclosure in the fourth quarter. A year ago it was eight percent.

4/16/07:
Most homeowners emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. Still, about 40 percent of homeowners who found themselves in default last year actually lost their homes to foreclosure in the first quarter. A year ago it was nine percent.

Judging by the rate of increase, I would say DQ will need to drop its optimistic canned intro phrase to read,
"Some homeowners emerge from the foreclosure process" and then to,
"Few homeowners..."
barely | 04.16.07 - 3:45 pm |

Diggin Deeper said...

Gwynster

Unfortunately it appears there are a several factors... all weighing in on the problem. High inventories, tighter credit, price depreciation, foreclosures, and buyer reluctance seem to be front runners, but part of this recipe should include:

High consumer debt

Inflation or cost creep in key everyday items.

Flippers and investors have left this market.

Sacramento's lack of robust job creating industries.

There are probably others. All in all this market was pumped up, imho, by pure speculation with no reasonable explanation, other than greed, for the price appreciation experienced. Take away the greed factor and home prices will ratchet down until there perceived as a fair and decent value.

Diggin Deeper said...

Max

Kind of like the Lereah spin we get every month. Far as I'm concerned you've got to get your own truth these days as there are too many agendas to fight through.

dr said...

A recent blog, here, found that less than 10% of these bank owned homes are sold at auction and end up back in the bank's inventory.

Assuming the blog's 10% figure is correct, what are the banks and other lenders doing with the other 90% of the property?

BTW, which blog was it?

Diggin Deeper said...

dr

Check out the blog on April 5 entitled "Sacramento: The Foreclosure Leader"

Gwynster said...

Diggin,

I agree with all of it. I'd also add declining population fueled by high housing costs, high cost of living, and retirements.

I know people will say that we're still gaining BA population but it's barely a trickle compared to the growth this area experienced in 2000 to 2004.

From the census estimates released 3-22-07:
County 7/1/00 7/1/2005
---------------------------------
Sacramento 1,230,401 1,363,423
RoC, actual 36,361 11,301
RoC, % 2.96% 0.83%

Solano and Sonoma were negative in 2005 (.15% and .19%). The surprice growth county for me was Colusa at 4.8%.

How long until we go negative if you take into account job losses and the wave of retirements coming in this area?

Our 2006 estimated population was just 1,374,724. These #s include births and deaths. I'd love to see this data broken down by inmigration, outmigration, intl immigration, and age group. There is a story here no one seems to want to touch.

Solano and Sonoma were negative in 2005 (.15% and .19%). The surprice growth county for me was Colusa at 4.8%.

Lander said...

Gwynster-

I noticed the same thing when media "reported" this last month. Net migration (domestic+int'l) was actually negative in Sacramento county for the first time this cycle. This is actually the second year that domestic migration has been down. The local media completely ignored this story.

I've had a post in draft (with a graph) for several weeks now. Hopefully it will see the light of day soon.

For now, here are the net migration figures:

2001: 27,698
2002: 26,090
2003: 18,534
2004: 10,815
2005: 2,108
2006: -375

Bottom line: more people are moving away from Sacramento than are coming.

Gwynster said...

Lander,

You are spot on about net migration. But people tend to look past it to overall growth including the birthrate/deathrate. Bring up the fact that babies aren't signing up for new mortgages and the next fallback is that illegal immigration will save us!

It just kills me. Some people don't have the sense gog gave a turnip.

The growth % for Colusa did surprise me. Anyone want to run the trend and see where we end up in 2009 when we're estimated to be into the boomer retirements with most of the resets having occurred?

Lander said...

the next fallback is that illegal immigration will save us!

Well, at least according to the NY Times article I posted on Monday, the illegal population is also moving away.

Diggin Deeper said...

Great observation Gwynster! One aspect that is so important but completely assumed otherwise

What's more, its probably the key threat that faces Sacramento's real estate and general economy today.

How could anyone expect price appreciation when population growth is stagnant or in decline? Add in the exodus of those mentioned in an ensuing blog "Casualties of America’s Housing Bust" and you are not only taking buyers away but dollars their local economy dollars as well.

We hear the spin about generational growth and demand but if Sacramento does not attract a vibrant job environment, what's the draw?

Diggin Deeper said...

There's another issue that might come about with regard to state and county governments. As prices fall so will property tax revenues. "Smart" homeowners, who bought at the high and choose to stay, will have their properties reassessed by the counties to pick up a lower tax base. Lower sales prices will drive down the tax base across the state. If this starts to snowball, the counties will funnel less and less to the state and the state coffers will suffer. It will probably mean higher taxes and layoffs.

Cmyst said...

Local governments are already feeling that sting of less revenue.
I have 4 kids, and 2 of them have seriously contemplated moving to a cheaper part of the US. One works with a nationwide company and he would make the same salary, with much lower housing and cost of living. 2 own, and 2 rent. My youngest daughter and I discuss RE a lot now, because she is in a state of semi-hopelessness that she and her husband will ever be able to afford even a very modest home in a working class neighborhood.
At least they are well aware of what they can afford, and aren't willing to do any "creative financing". One of their friends, a waitress, bought a home in 2005 and tried to talk them into buying one a year ago.

Gwynster said...

Cmyst,

Grats on raising smart kids.

It's funny, I walked in on a conversation about 2 or 3 weeks ago where some faculty members and grads student were talking about opportunities once out of school. One of my faculty told them point blank to get out of CA and try the research triangle in NC. What it boiled down to was that if they didn't have tenure, they'd be moving because the research environment is better there and cost of living is reasonable. I dropped my jaw because I had been saying this since 1998. Wish I had jump then.