The Housing Bubble

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The Record Searchlight in California. “Bucking state and national trends, foreclosure activity in Shasta County in April went up for the second straight month. Eric Smith of Keller Williams Realty in Redding said government efforts to stem the tide of foreclosures aren’t working. ‘The result is that as homeowners continue to struggle financially or as they begin to realize that they are too far upside down on their homes, they walk away,’ Smith said.”

“Chuck Pierce of ERA Select Properties, who is hired by the banks to list foreclosed homes in Shasta County, said banks continue to hold off on doing foreclosures. But Pierce didn’t specifically know why. ‘You can drive down the street and see the houses unoccupied for a year or two — they are not being foreclosed on,’ Pierce said.”

“Pierce is the guy who will knock on the door of a home that has been taken back by the bank and offer the residents money for the keys. ‘In the process of easing people out the door, I will ask, ‘When did you make your last payment?’ The answer I get is anywhere from a year to two years,’ Pierce said. ‘The banks are not foreclosing on the property — they are not doing it. What I am hearing from (bank) asset managers from across the country is that this is just the tip of the iceberg, that there are still an awful lot’ of foreclosures out there.”

The Daily Bulletin in California. “National foreclosure activity fell last month on an annual basis for the first time in four years, with the Inland Empire’s filings dropping by a quarter from March, according to data. But the latest numbers most likely reflect a stronger crackdown on foreclosures nationwide rather than an improvement in homeowners’ abilities to pay their mortgages, industry observers said. ‘It’s a sign of the times that there’s a huge response to minimize the number of foreclosures overall,’ said Brad Kemp, director of regional research at Beacon Economics.”

“Government programs, such as the federal Home Affordable Foreclosure Alternatives Program, which went into effect in April, probably contributed to the decline, industry observers said. ‘There’s a lot of things happening that’s propping up the market and helping foreclosures to subside,’ said Daren Blomquist, RealtyTrac’s marketing communications manager. ‘To me, this is a fragile trend we’re seeing. It can be upset if some of those government props go away or if the market faces more trouble from other areas.’”

“Kim and Kris Darney, Ontario-based real estate agents who focus on short- term sales, said housing conditions continue to be bleak in the region. ‘I believe those numbers are somewhat of a false hope for the Inland Empire,’ Kris Darney said.”

“The Darneys said they see more banks allowing homeowners to sit on their property without making payments, which they attribute to the decrease in foreclosure filings. ‘They’re letting people hang out in their homes right now,’ Kim Darney said. ‘They don’t want more (foreclosures) in their inventory.’”

The Desert Sun in California. “The Desert Sun brought local real estate experts together for its monthly Business Roundtable discussion: What’s your assessment of the market? Greg Berkemer, executive vice president of the California Desert Association of Realtors: ‘The last couple of months, we’ve seen an up-tick in sales; part of that may be our season and the good weather here. But if the sales continue to tick up and prices moderate up slowly, then we’ll start to work our way out of this. There obviously are some real wild cards out there.”

“The wild cards being? GB: One is the shadow inventory — how large it is. So, if the banks were to take all (their) housing inventory and dump it next Tuesday, they would not only flood the market and hurt price, but they’d hurt themselves. It would force their own prices down from the REOs.’”

The Greeley Tribune in Colorado. “For the first quarter of 2010, Weld County rose to the top of the heap across the state, coming in with the highest foreclosure rate among Colorado’s major metropolitan counties. Foreclosure sales are on the rise after a series of lender-imposed moratoriums artificially dropped numbers from where they were the same time last year.”

“Weld County, which continues to have one of the highest unemployment rates in the state at 9.4 percent, saw 493 foreclosure sales, up 41 percent from the same time last year, when lenders put a halt to foreclosure proceedings. ‘Lenders are doing only an OK job of evaluating homeowners for a permanent modification,’ said Sara Gilbert, executive director of Consumer Credit Counseling Service of Northern Colorado and Southeast Wyoming. ‘If some of your problems relate to life issues, employment, or whatever, you are going to have a tough time modifying that loan. We’re seeing an awful lot of that now, and it’s troubling, for people losing their homes, and for us, because sometimes we cannot help.’”

“The loan modifications that have been approved have not been enough to affect the state’s foreclosure problem, which is likely to continue if jobs continue to be few and far between. The growth in the 2010 foreclosure sales, said Ryan McMaken, spokesman for the Colorado Division of Housing, is a result of a massive increase in filings in the second and third quarters of 2009, just after the moratoriums were lifted. ‘A lot of it really just depends on the jobs situation and wage growth,’ McMaken said. ‘If we look at personal income in Colorado … we certainly haven’t gotten back the jobs lost since our peak in 2008. Until we get those jobs back, we won’t see a big decline in foreclosures.’”

The Coloradoan. “Since the first quarter of 2009, foreclosure filings have declined in Larimer County, dropping 15.1 percent, which is the highest drop in the state. At the same time foreclosure sales have increased year-over-year by 55.1 percent. In late 2008, several national mortgage servicers, with major investors like Fannie Mae, temporarily slowed or halted the processing of foreclosures to allow for new loss mitigation policies to be put in place. Consequently, few foreclosures proceeded to final sale during the first quarter of 2009, driving down foreclosure sales totals for the period. Comparing the first quarter of 2009 to the first quarter of 2010, foreclosure sales were 53.6 percent higher in 2010.”

“Last summer, Larimer County experienced a spike in foreclosure filings, which peaked around 550. With a six to eight month lag time from filing to sale, McMaken said the more than 50 percent foreclosure sales now are a result of last year’s jump. Billie Jo Downing, a Realtor in Loveland and a member of the Foreclosure Prevention Task Force attributes last year’s jump to the moratorium. A backlog of people in homes that had not paid their mortgage for a year was unleashed as the government stalled the inventible rush of filling now translating to sales.”

“Downing and Sara Gilbert of Consumer Credit Counseling Service of Northern Colorado said the future of foreclosures in Larimer County is contingent on jobs. Gilbert said 53 percent of her housing and mortgage counseling clients overall in 2009 said that their difficulty with their mortgage was related to a job loss or reduced income. For January to now, that number has increased to 56 percent. Job loss is the most prominent reason for difficulty in making mortgage payments for clients, Gilbert noted.”

“‘We’ve seen only growth in demand for housing counseling and the hotline counselors have been see-ing more and more clients as time goes on,’ said Stephanie Riggi, manager of the Foreclosure Hotline Call Center.”

The Pioneer Press in Minnesota. “The Twin Cities housing market is likely to see an elevated number of bank foreclosures in 2010. That’s one take-away message from a report Monday by the Minnesota Home Ownership Center, which said pre-foreclosure notices from mortgage service companies to troubled borrowers were up about 25 percent in the Twin Cities during the first quarter compared with the same period last year.”

“Lenders issued 11,047 pre-foreclosure notices to Twin Cities homeowners during the first three months of this year, up from 8,846 during the comparable period in 2009, according to the St. Paul-based group. A similar increase was seen statewide. ‘We may be in danger of 2010 being at least as bad as 2009 in terms of foreclosures,’ said Ed Nelson, spokesman for the Home Ownership Center. There’s also a chance, he added, that this year’s totals could match those in 2008 ‘which was our record breaking year.’”

“Foreclosure totals in Hennepin, Anoka, Dakota and Washington counties during the first quarter were up a little bit compared with 2009, wrote Aaron Dickinson, a real estate agent with Edina Realty. Bank foreclosures have had a large impact on the housing market in recent years as a surge of low-priced foreclosure homes has depressed median sale prices in the Twin Cities. But the impact of current pre-foreclosure notices and sales likely will stretch into 2011, Dickinson wrote.”

“‘A lot of the increasing delinquencies are sitting in limbo in the period prior to a (foreclosure) sale,’ Dickinson wrote. ‘This leads to a backlog of ’shadow inventory’ that someday will show itself.’”

The St Louis Post Dispatch. “Foreclosure activity surged in St. Louis in April, up 12.6 percent from March and 20.6 percent from April of 2009. This was an abrupt change after a quiet first quarter, and bucked the generally-positive national trend. It’s worth noting that there’s a lot of noise in these numbers (compiled from 17 local counties by real estate data firm RealtyTrac), which have been prone to one-month swings in the past.”

“But it’s also true that the number of filings – properties that are either set for an auction or repossessed by the bank – has climbed every month since the start of the year – it just climbed faster in April. This comes at a time when foreclosure relief efforts, and delaying tactics, by both the federal government and the banking industry appear to have been having some positive effect. As we reported last week, the number of homes actually being repossessed by the bank has been flat for months, according to a different report.”

“But that was in March. In April, according to the newer RealtyTrac numbers, banks began pulling the trigger on repossessions, actually taking back more of the houses they’d begun foreclosing on. RealtyTrac counted 789 repossessions in April, their highest tally for the region since September and second-highest in a year. In March, by contrast, there were 299.”

“In other words, more foreclosures are moving through the pipeline and winding up at the end, in the hands of the bank. The surge in REO’s is not unexpected. Banks weren’t going to hold mortgages in limbo forever. It could actually be a side effect of the slowly-stabilizing housing market – banks may now feel more confident in their ability to sell these homes. Or it could be a sign that mortgage relief efforts are failing in the face of stubbornly-high unemployment – after all, cutting your monthly payment only goes so far if you don’t have income. Or it could just be statistical noise, a one-time bump.”

The Honolulu Advertiser in Hawaii. “Real estate in Hawai’i’s foreclosure pipeline hit a high for the year last month, signaling that homeowners continue to struggle with mortgage payments even as the economy and real estate market are showing signs of a slow recovery. RealtyTrac reported that 1,474 Hawai’i properties were in some stage of foreclosure in April. The figure was a little more than double the year-earlier figure of 684 properties, and was the highest this year next to the 1,302 properties in January. Only one other month had a higher count, and that was December at 1,534.”

“Hawai’i was one of six states with foreclosure counts that at least doubled in April from a year before. Until early last year, Hawai’i had maintained one of the best foreclosure rates in the nation, but since then has sunk in the rankings. That’s partly because home prices in other states crashed earlier and are now faring better, while Hawai’i’s housing market experienced a more moderate downturn that only recently has shown signs of a nascent recovery.”

“Relatively high levels of unemployment as well as property values that are still off from peaks a few years ago are largely behind the still-heavy foreclosure problem.”

The Star Bulletin in Hawaii. “Hawaii’s April foreclosures added up to a higher rate than the national rate of foreclosures. Oahu remained well below the national rate of foreclosures in April, but the Big Island and Maui markets took large hits. ‘”I think we’re just gonna see more inventory hitting every day,’ said Big Island and Maui Realtor Howard Dinits. ‘The foreclosure process takes a long time in Hawaii.’”

“The top five neighborhoods in the state with the most foreclosures were Kailua-Kona, Kihei, Ewa Beach, Lahaina and Waikoloa. Dinits said Waikoloa and Kihei foreclosures are due to a large number of owners who own second homes. ‘It’s an investment for them,’ Dinits said. ‘That’s the real reason for the high numbers in those areas. If you gotta make a choice between your house or your vacation house, you’re gonna keep your house.’”

“The number of borrowers losing their homes is still rising. Banks seized a record 92,000 homes last month. And there are millions more potential foreclosures ahead. Nearly 7.4 million borrowers, or 12 percent of all households with a mortgage, had missed at least one month of payments or were in foreclosure as of March, according to Lender Processing Services Inc.”

The Christian Science Monitor. “At this point there are so many bank-owned foreclosed homes that it would take almost nine years to clear out the housing inventory. That time frame doesn’t even begin to take into consideration the additional homes that are likely to also enter the backlog while the current inventory of foreclosed homes gets cleared out.”

“According to The Wall Street Journal: ‘As of March, banks had an inventory of about 1.1 million foreclosed homes, up 20% from a year earlier, according to estimates from LPS Applied Analytics. Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process, meaning their homes were well on their way to the inventory pile. That ’shadow inventory’ was up 30% from a year earlier.”

“Based on the rate at which banks have been selling those foreclosed homes over the past few months, all that inventory, real and shadow, would take 103 months to unload.”

Reason Magazine. “Amherst Securities analyst Laurie Goodman told the National Economists Club in D.C. 7.2 million are already in the delinquency pipeline, and 250,000 are going delinquent each month bringing the total to 12 million. ‘Once you’re 60 days delinquent, a foreclosure is highly probable,’ she said.”

“She emphasized that negative equity is the main problem, and that any program which doesn’t significantly reduce principal won’t work. She estimated that under the most optimistic assumptions, President Obama’s HAMP program would avert 1.1 million foreclosures. Goodman added that banks aren’t renegotiating underwater mortgages in which they hold a second lien, ‘a huge conflict of interest problem.’”

“She noted that FHA loans are still the whole market and suggested that the homebuyer tax credit, due to expire at the end of this month, and other housing incentives have borrowed so much demand forward that the only way left to stimulate the market would be for FHA to ease its requirements and allow investors to participate.”

“The shadow inventory will be an important drag on house prices for years, which will in turn prompt more efforts to use your money to prop up the sagging market. So it’s important to get a handle on how large this inventory is. Best estimate as of this time: One crapload.”

From WFTV in Florida. “Maria Torres and her family recently decided to move into a vacant lake front home in Deltona even though they didn’t own it. They moved furniture in and even changed the locks at the 3,900 square foot home on Page Court. The sheriff’s office began to investigate the people living in the home on Tuesday when deputies were called out twice for a complaint about a party. At first, deputies allowed the Torres and her family to stay even though she didn’t own the home because she cited a little known state law called Adverse Possession.”

“But on Thursday deputies forced Torres to leave because they said the law didn’t apply to her. Deputies cited Torres for trespassing. She may be charged with burglary and criminal mischief. ‘It’s the people that don’t have a home that are being taken for suckers with these banks and these realtors,’ Torres said.”

“Neighbor Dave Morocco said the house had been empty until a few days ago when Torres and her seven kids moved in. The home used to belong to Deltona Mayor Dennis Mulder. During the housing crisis in 2008, he told Eyewitness News he paid the bank to take the deed back.”

“Donna Jacobs was in the process of trying to buy the home and had no idea people were living inside. ”I’m a little worried now about the neighborhood knowing people have decided to come in and live in the house,’ Jacobs said.”

The Palm Beach Post in Florida. “Cracks in the stucco show through the faded pastel green and pale yellow paint on homes near the town square. Along an oak-lined road to the Abingdon development, weeds poke up through grass that’s just a little too tall. Bustling and perfectly manicured five years ago, Tradition in Port St. Lucie is among the Treasure Coast communities suffering from the burst of the real estate bubble. A creditor has foreclosed on Core Communities, Tradition’s developer. Foreclosed homes and short-sale houses sit empty in many other neighborhoods.”

‘Martin County foreclosures started out bad in 2008 with 1,742, got worse with 2,082 last year and number 466 so far this year. St. Lucie numbers are much higher - 9,570 foreclosures in 2008, 8,324 in 2009 and 1,973 through March. It’s difficult to know how many foreclosed homes remain empty. Those reporting the numbers of empty homes often are prejudiced, said St. Lucie County Property Appraiser Jeff Furst. ‘Realtors want the situation to be better than it is.’”

“He estimates about a 19-month supply of residences, condos and lots on the market in St. Lucie, if ‘not a lot of new stuff’ comes up for sale.”

The Sun Sentinel in Florida. “In Palm Beach County, median home prices have fallen 42 percent from a peak of $421,500 in November 2005, according to the Florida Realtors trade group. In Broward, prices in March, the latest data available, were off 45 percent from a peak of $391,000. Zillow said Monday that 44 percent of single-family homeowners with mortgages in Palm Beach, Broward and Miami-Dade counties were underwater at the end of the first quarter. That works out to 371,387 homes.”

“Analysts say it could be 15 years or longer before some of these homeowners have their equity restored. The Zillow report shows that many sellers still are at a disadvantage, even as two federal tax credits have brought more buyers into the market in recent months. But some real estate analysts say the expiration of the credits April 30 will slow sales dramatically in the coming months, leading to more price declines.”

“Jon Klein, a real estate agent for Coldwell Banker in northwest Broward, said some of his clients understand what’s happening in the market and are prepared to lose money on a sale. But others are misinformed, he said. ‘People still think their houses are worth more than they are,’ Klein said.”

Post off-topic ideas, links and Craigslist finds here. The DC meetup link at the forum is here. Click here for the shadow inventory thread.