Tuesday, July 29, 2008

Stockton Agent: 70% of Foreclosures Are "Walk Aways"

From the BBC News:

Professor Nouriel Roubini of New York University, one of the first economists to warn of the dangers of the American house price boom, believes the number of people positively choosing to walk away is growing rapidly. "This is becoming a tsunami of voluntary defaults," Professor Roubini says.
...
In the city of Stockton - the foreclosure, or repossession, capital of the US for 2007 - estate agent Kevin Morgan sells repossessed houses on behalf of the banks that now own them. According to him, walking away has become commonplace. "I would say it's probably 70% of the volume of our foreclosures right now," he says.
From the Stockton Record:
A north Stockton Linens 'n Things store is among 57 stores that will be closing in the next several months nationally as the home furnishings and bedding retailer continues through bankruptcy reorganization.
...
Steve Carrigan, economic development director for Stockton, said Linens 'n Things is a victim of the economy but that there have been relatively few retail closings in Stockton. "This probably isn't the end, but hopefully, we're getting near the end of this bad-news cycle," he said. "In that sense, we've been very fortunate. We've just about weathered the storm."
From the Modesto Bee:
President Bush is expected to sign housing bailout legislation this week that could give Northern San Joaquin Valley agencies perhaps $120 million to buy foreclosed homes. Details of how the $4 billion federal program would work are sketchy, but local real estate experts predict that the new government venture could do more harm than good.
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"It's a joke. It won't even make a dent," [ForeclosureRadar's Sean] O'Toole said. "It's a complete government boondoggle." During the past year, O'Toole said lenders foreclosed on nearly $6.8 billion worth of home loans in San Joaquin, Stanislaus and Merced counties. So giving local government $120 million to buy those homes "is meaningless."

Modesto real estate leaders don't see much merit in the plan, either. "It's not going to help solve any problems at all," said Mike Zagaris, president of PMZ Real Estate. "It's an act by politicians who are trying to get re-elected. It has little to do with helping people and will only, in the end, contribute to our national budget deficit."
From the Manteca Bulletin:
Manteca - and every other community in a similar situation - should be jumping up and down about $3.9 billion in outright federal grants to cities hardest hit by the foreclosure mess to allow them to buy foreclosed homes and rehabilitate them to help create affordable housing, right? Guess again.
...
There are so many things wrong with this as to why it won't work that you don't need to interject philosophy of what government should and shouldn't do into the debate.
From Minyanville:
According to the Journal, metro areas like Sacramento, California, Denver, San Diego and Las Vegas actually reported a decline in housing inventory from a year earlier. Supply is still well above historical averages but, the report argues, if this trend continues it could usher in the end to the real estate slump.
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Meanwhile, back in a world still loosely based on reality, easing inventory is a result of changing market dynamics, not an imminent bottom. First, in troubled areas like California’s Central Valley and Inland Empire, (east of Los Angeles) Phoenix and Las Vegas, foreclosure and other distressed sales account for almost half the total transactions. As vulture funds and other investors swoop in to purchase delinquent mortgages and abandoned houses, such opportunistic buying has reduced inventory. Small boutique investment firms, big hedge funds and Investment banks...are driving these markets. Some are buying foreclosed homes en masse, while others are snapping up delinquent mortgage at a deep discount. As the new owner of the loan tries to sort things out with the borrower, homes previously for sale come off the market.

The majority of these properties, however, will just end up for sale again: Almost half the delinquent mortgages traded in this market ultimately end up in foreclosure. Investment banks and hedge funds aren’t in the business of owning portfolios of residential real estate, so in a few months they’ll start punting homes at further discounted prices.

15 comments:

smf said...

"The majority of these properties, however, will just end up for sale again: Almost half the delinquent mortgages traded in this market ultimately end up in foreclosure. Investment banks and hedge funds aren’t in the business of owning portfolios of residential real estate, so in a few months they’ll start punting homes at further discounted prices."

!!

Is that another of my predictions coming true!?

Sorry, sippn...

Let me repeat this again, in very simple terms:

If you build 150 homes for 100 people, you are in trouble.

It is THAT simple.

And there is the 'hidden inventory' being called out again.

The sooner this thing goes down the drain, the sooner we can pick up the pieces and move on.

Right now, we are at the 'eye of the hurricane' stage. Things seem calm, but it won't last...

(Some may also recall that a consensus is building that government intervention during the Great Depression made it last much longer.)

Jacob said...

A couple billion may sound like a lot but it is trying to fix a 10 trillion dollar problem.

It is like paying $10 for something and now it is worth $5 and you cant sell it anyway, but the government sends you a check for $.01 to help out. Woo hoo.

The government could have spend this $300 billion on builing solar panels and wind mills, put people to work and help with the energy crisis.

Its funny, they do this to get reelected but 75% of people dissagree with this bailout.

Wait for banks to start dumping the properties at any price as they start to realize that there is no recovery coming and their chance to sell (even at 50% off) is running out, fast.

Was talking to a realtor this past weekend and was told that her company was notified they would be getting 1200 more listings next month. she worked for coldwell banker if I remember correctly.

Seems like a lot. Merrill just dumped billions of CDOs for 22 cents on the dollar. And if that wasnt bad enough, they financed the purchase... god help us.

Mervyns is closing, so get rid of another couple thousand jobs. We are just getting started on this ride.

Too many homes is a big problem. Even bigger imo is the fact that the majority of people could barely afford a home even with all the fancy loan scams out there. Remove those and also make people come up with a down payment and you have a very small demand for homes.

Add in buyer sentiment and you have an even lower demand. People wont buy cause they think prices will go lower, and prices will go lower because people arent buying. Just like the bubble fed on itself on the way up, the crash will do the same on the way down.

Maybe lenders will realize that they should lend to people that 1) put some money in, and 2) can actually pay back the loan.

smf said...

When a typical starter home was about $115K, little down payment was no problem.

When that home was valued at $350K, no downpayment is a big problem.

Having little money down when homes are affordable again is not a big deal.

The big deal was when banks were giving loans to people who had no chance of ever repaying it back, regardless of income level.

paranoid renter said...

"In that sense, we've been very fortunate. We've just about weathered the storm."

Yeah, right. The storm has barely begun!

This is like the stock market going up when oil goes down. In a few months, nothing will be able to make it go up.

James said...

"(Some may also recall that a consensus is building that government intervention during the Great Depression made it last much longer.)"

I believe that would be the opinion of the great economist Milton Friedman. The new deal hurt, and continues to hurt, our country more than it helped.

sacramentia said...

Where is the consensus building that government intervention made the depression worse?

This is opposite of what I've been hearing and also opposite of what people who lived through the new deal have told me.

norcaljeff said...

Oh Sippin, where are you? Maybe he got cut by the falling knife. Guess he only shows his face when things are quiet cuz I know he doesn't have the b_lls to put his money where his mouth is. He's just trying to get suckers to bottom the market for him.

Jacob said...

"In that sense, we've been very fortunate. We've just about weathered the storm."

The eye of the storm is calm. The storm it self is just getting started.

Diggin Deeper said...

"The new deal hurt, and continues to hurt, our country more than it helped."

Amen!

One little proviso in the bailout goes mostly overlooked...Congress opted to increase the Federal debt ceiling by $800B. Now why would that happen if they only needed $350B for the bailout?

Dubyah is going to hand off a $480B budget deficit to the next prez. Since the bailout will take months to get off the ground, one can see that deficit reaching $800B over the first two term years that follow, if not $1T when you factor in govt inefficiency and waste.

New New Deal?....or Weimar...We'll soon see...Either bailout stabilizes the RE markets and allows the financials back on their feet or it fails and takes the dollar with it...

James said...

The ADP Employer Services report showed U.S. private employers added 9,000 jobs in July.

Patient Renter said...

you don't need to interject philosophy of what government should and shouldn't do into the debate.

That's always the first thing that comes to my mind. Should the government be in the business of managing homes? It's a slippery slope to having the government do everything for us when the government's one and only job is to protect freedom and liberty, and it can't even do that right.

Hardmoneyloans.org said...

How much is your home worth? Well, it all depends where you live.

The real estate market is still shaking. New data suggests that home prices have hit a new record low. In every new study that comes out, homeowners from Miami, to Las Vegas, Phoenix and Los Angeles, have seen their home value go lower every time.
Is that disappointing? Of course it is.
Should we sell? Is not a good time.
Should we stick to it? Yes, if you can.
Have we hit bottom? Nobody knows.

Banks are facing their worst foreclosure crisis.
Don’t take me wrong, it’s good if you are in the market to buy a home for yourself or if you are an investor, but if you are not, and you own a home, most likely the value of your property is down at least 15 %.

Why do banks care if you are loosing your home? By having to sell repossessed homes, banks have to literally slash their prices down. It gets very costly for them, after all, they have to pay property taxes, maintenance costs, and whatever utilities that need to be paid, all of this expenses for a house that it’s just sitting there, vacant, and the bank is getting nothing in return.

The latest study by the S&P/Case-Shiller Home Price Index of 20 cities, revealed the news that for 22 consecutive months home prices dropped. Only from April to May, 2009 the decline was of 0.9 %

smf said...

Where is the consensus building that government intervention made the depression worse?

The Smoot-Hawley Tariff Act was an act signed into law on June 17, 1930, that raised U.S. tariffs on over 20,000 imported goods to record levels. In the United States 1,028 economists signed a petition against this legislation, and after it was passed, many countries retaliated with their own increased tariffs on U.S. goods, and American exports and imports plunged by more than half. In the opinion of some economists, the Smoot-Hawley act was partially responsible for the severity of the Great Depression.

Dave said...

Jacob said
"The government could have spend this $300 billion on builing solar panels and wind mills, put people to work and help with the energy crisis."

I totally agree, why is it that everyone supports wasting billions (or trillions in the case of Iraq) on stupid ideas. But when it comes to something constructive like installing something that would pay us back after a few years and keep paying dividends we as a nation can't support it.
$300 Billion would get us at least 30,000 megawatts of power from solar. The money we've blown in Iraq would have gotten us 100,000 megawatts. Record electrical usage in CA is somewhere in the 40,000 megawatt range. When will we learn. And it would produce a bunch of jobs that could pay for all that empty housing.

sacramentia said...

SMF - Fair point, but the construction of the infrastructure like dams that was part of the new deal was good. On balance, I think the government did more good than bad, but I agree that tariffs hurt.

The government should do things focus on redistributing the wealth to things that can generate more wealth in the future like Dave's solar idea.

Has anyone explored putting solar electricity or heat on your house?