Tuesday, June 17, 2008

Stockton Realtor: 90% of Sales are Foreclosures and Short Sales

From Lyon Real Estate (via Home Front):

Our [4-county] average price has dropped to 297,000 down from a high of 472,000 in June of 2006. Inventory is now 16% lower than the same period last year but this does not mean we are at the bottom yet. There has been a continued increase in ‘notice of default’ being filed and those homes will be coming on the market in the next 60 days. In addition to that, REO (bank owned) accounts for 58% of all Pended and Sold transactions.
...
[E]ven though sales are brisk and better than last year we are still seeing price per foot of the sold properties continue to drop. REO inventory is expected to increase through the summer and if interest rates start to rise we will see greater pressure on home values to decline.
Unlike 2006 and 2007, there was no spring bounce in Sacramento home prices this year.



From the Stockton Record:
The momentum in existing-home sales in San Joaquin County has continued to build, with May sales reaching the highest monthly level since August 2005 as more buyers snapped up primarily foreclosure properties...The median selling price also continued to slip, sliding from $240,000 in April to $237,000 last month throughout the county, the report said. That's the lowest median price seen in the county since February 2003.
...
In a traditional sales market, a cross section of houses sell,...Art Godi of Art Godi Realtors...said. Currently, about 90 percent of sales are foreclosures and short sales, and almost all are under $250,000, he said, "and that's the bottom of the market."
From the Sacramento Bee:
Developer Allen Wayne Warren once planned to build hundreds of new housing units on and around Del Paso Boulevard, the North Sacramento main street the city has worked for years to revitalize. But the falling real estate market caused Warren to scale back his dreams. Now, he's negotiating to sell three mostly vacant properties on the boulevard to the Sacramento Housing and Redevelopment Agency.
...
If Warren accepts $1.4 million for the mostly vacant properties, he will be taking a substantial loss. According to property records, he paid about $2.5 million for the properties in 2005 and 2006.
From the CVBT:
For home sellers who are desperately devout or devoutly desperate, Modesto mortgage banker Philip Cates has something he’d like them to bury. Mr. Cates sells plastic statues of the Roman Catholic Saint Joseph. Home sellers desperate for any kind of nibble from a buyer are supposed to bury the statues near the “for sale” sign in the front yard, head down, “feet toward heaven,” he says.
...
Mr. Cates, who operates out of a modest suite of offices in a downtown Modesto building that house his Service 1st Lending office, says business, at least the statue selling business, is booming...Mr. Cates says he is now “the largest seller of St. Joseph statues in the country.”...“It’s kind of my hedge bet for the mortgage industry, I would say,” he says.
From the LA Times:
Home-mortgage specialists may have been the first lenders to suffer for their roles in financing the housing bubble. But, as foreclosures rise and home prices fall, many smaller banks and thrifts that backed residential developers and home builders are watching black ink turn red and are spending uncomfortable amounts of time with regulators.
...
Residential construction loans, which generate big fees, were especially profitable for smaller banks -- until housing collapsed in places like the Inland Empire, where prices are down more than 30% from their highs, and the Central Valley, where some former boom markets are off more than 40%.
...
According to data tracker Foresight Analytics of Oakland, 15.8% of single-family home construction loans were at least 30 days delinquent in Riverside and San Bernardino counties last quarter, up from just 1.7% a year earlier. The delinquency rate was 14.7% in Los Angeles County, 14.9% in Orange County and 15.4% in Ventura County. It was 30.4% in Merced County, near Sacramento.
From the Modesto Bee:
The Modesto Bee is cutting 15 jobs, or 4 percent of its work force...and The Fresno Bee, 44 people, or 7 percent of its staff.
From the Star-Ledger:
The second quarter of the year fared no better than the first, as the nation's commercial real estate market continued its downward trend, according to the latest PricewaterhouseCoopers Korpacz Real Estate Investor Survey...Transactions involving significant office, apartment and retail properties plunged at least 79 percent in April compared with a year earlier, the report states, while industrial sales fell the least, 67 percent.
...
According to the survey, the office market in cities including San Francisco, Philadelphia and Fort Lauderdale, Fla., are in contraction. Other Florida cities, including Miami, Tampa and Jacksonville, are also declining, as are San Diego and Sacramento, Calif.

18 comments:

Diggin Deeper said...

I really don't understand why realtors would even bother with short sales. It takes forever to get one to close and by the time you do market pricing has fallen below the sale price. Why not just avoid them and allow foreclosures to drive your sales effort? At least the banks are willing to deal once they actually own the home.

I need a little help here. How does a short sale benefit the seller? I would think your credit is screwed either way. Aren't there tax implications in short sales that aren't present in foreclosures?

Buying Time said...

There are some benefits. Two that I can think of....for the bank, the house doesn't get trashed, so they don't end up spending big $$ to even put it on MLS. For the buyer, you still get disclosure.

Biggest hurdle that I have found is the second lien holders.

Sippn said...

BT, yes, but the lenders don't even have managers assigned for short sales.

Looking at stats, shorts are the lowest performing % of sales listed, almost moving at 12-20 months inventory rate, slower than non distressed which is 5-6 months inventory at worst.

Don't forget, its already on MLS, that $$ would come from their proceeds.

Diggin Deeper said...

If you owe taxes on the proceeds of a short sale but not on a foreclosure, why even bother? Seems like disclosure vs. say a $30,000 tax bill is a no brainer. With lax credit laws, I guess I'd take a little credit punishment over that bill any time. A short sale make sense only to the bank as far as I'm concerned and is a risk to the buyer and the seller.

Husmanen said...

Husmanen,

I have personally given up short sales and wait until the homes are bank owned before we act.

Regarding the tax implications, HR3648 was signed by the President in December that removed the tax burden. The act is called "Mortgage Forgiveness Debt Relief Act of 2007". Also, extending the PMI tax deduction.

Diggin Deeper said...

Thanks for the update on the tax issue.

As far as I'm concerned any short sale is a time lapsed foreclosure. Since it takes several months before the bank actually takes possession, with a market in a tailspin, it makes no sense to even consider buying one.

luca said...

I sold a condo to one of my co-workers for $180k in 06 and foreclosure's in the same area and condition are selling now for $65k. I recommended that he do a short sale last feb. - our realtor friend put it up for $75k - no bites of course. Bank will be taking it soon. I feel guilty for selling it to him as I knew some of the equity had to be eroded- but I had no idea it would crash as hard as it did.

I have been buying properties in the area and have been avoiding short sales - they are so pointless- offers are accepted probably less than 5% of the time and by the time a successful one goes through the owner has already fallen into foreclosure and or there is a foreclosure that comes up for sale in the same pricing bracket.

Houses are a bargain now in my opinion but there is nothing to put any support on current pricing levels.

Does anyone feel like we are at the bottom right now- a bottom that can last 3-6 years? not sure how prices on some homes can go down further.

luca said...

look on realtor.com - 80% of homes listed between $200k - $450k are short sales and 19% are foreclosures and 1% are personal sellers.

What does that say about the future of lincoln with 80% of homes listed as short sales- will most all become foreclosures?

subprime loans are the sucker punch that brought prices way down today, ALT-A loans will be what brings the hurricane punch to the valleys home prices.

party on
luca

luca said...

Any builders here?

How much would it cost to build a similar house and lot like this in lincoln

http://www.realtor.com/search/listingdetail.aspx?ctid=93131&typ=7&sid=e07310bb5eed487eb5ed3a2ce852f99b&pg=6&lid=1100395642&lsn=54&srcnt=536#Detail

1063 Downing Cir
Lincoln, CA 95648
MLS ID# 80059421



is it for sale less than replacement cost?

Diggin Deeper said...

Luca

I've maintained all along that once homes fall below replacement costs a bottom would follow fairly soon thereafter. I don't know if that's a generic $100 per sq. ft. or $90 or?

The fallacy with that thought is that the banks have to go along and price accordingly. What we're finding is the banks could care less about prices when they have they take in two or three homes for every one they sell. As they watch their carrying costs go up, they desperately need to relieve their backlogs in order to remain viable. So we see homes hit the market 10-15% below TODAY'S price, and buyers line up and basically buy an insurance cushion against future equity deterioration. Once sold that price baselines the neighborhood, and it takes another drop in order to move the next one.

However, I'm not abandoning the replacement cost / bottom creating scenario as rents should provide a pricing backstop and present an attractive entry point on a case by case basis.

We may have bottomed already in some very isolated areas and price points. But these discussions will move to areas that have held up and are now experiencing pain...Lincoln, Rocklin, EDH, Rosevill, etc. In effect, they get to be the next leg down and should be major contributors to the 50%-off-the-high we're heading towards. All of course, imho.

Keep in mind the overall economy has to hold up and rates have to be fairly tame for this thing to really find a solid bottom. It a wild card right now that holds enough risk to keep people away.

Diggin Deeper said...

This is sobering as this RBS analyst has been right on in the past....

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/18/cnrbs118.xml

As far as our real estate market goes, there's so much that's really beyond our control

Jacob said...

Yea, banks could care less about replacement costs.

Also if you want to buy a home to rent you still need to find a renter. Dont forget that most areas are over built.

After every home that can be occupied, is, how many are left over that nobody wants at any price?

And of the minimal sales we have, most are still to speculators.

For example, I was looking at MLS 80059269.

Listing price is 869k. Last sale was March 08 for 750k. So 3 months equals 119k profit for this "investor".

We are just now starting to get the waves of layoffs. And still have a huge amount of Alt-A loans out there that are starting to reset and will continue to for a few years.

Interest rates have been going up and will likely continue to do so.

So we might be at the bottom if this were a normal market but there is still too much downward pressure.

smf said...

In 2002, our house was built for about $100/sq.ft. with a .25 ac lot that cost $70K.

The total loan on a 2214 sq.ft. house was $237K.

It was not cheap construction.

While material prices were much higher during the bubble, current homes can be built for much, much cheaper.

Diggin Deeper said...
This comment has been removed by the author.
Diggin Deeper said...

smf...

How much less per sqft do you think they can be build for today? Decent quality...

Sorry fingers got tied up....

Patient Renter said...

Yea, banks could care less about replacement costs.

Furthermore, the market in general doesn't necessarily care about replacement costs. Replacement cost is just ONE of many factors that could support a price bottom, but it's not the dominant factor.

James said...

"While material prices were much higher during the bubble, current homes can be built for much, much cheaper."

Which materials are much, much cheaper? Concrete prices have not drop a dime around here. Steel prices are still making new highs. Copper is not coming down. Lumber is the only soft spot. Engineering and excavation costs have not dropped, mostly due to high fuel costs for that thristy iron. Ashpalt and every other biproduct of oil is still expensive.
Talking with builders, the biggest cost savings is the builders themselves. They are willing to break even just for the work.

James said...

Jane, thought you might like this.

We just got our summer reports from Moody's and CBRE on the Sacramento Office/Retail/and Industrial markets. Some 3rd party income data for you.

"The average per capita income is estimated at $39,641 - 1% above the national average. Total employment stands at 901,780 workers."
"The short-term forecast calls for an overall increase in manufacturing and distribution workers."