Sign the World is Coming to an End

Sheila Bair is the head of the FDIC.

She's got a front row seat to witness the real estate crisis. This past Friday alone her agency took over 5 more troubled banks with non-performing real estate loans. She also has an army of economists on staff that must be telling her we're far from out of the woods yet.

So who does get advice from on her home? According to this article her Realtor:

After listing the five-bedroom property in April, the couple cut the price to $745,000 less than three weeks later, then reduced it again before withdrawing the listing. Ms. Bair's real-estate agent, Stephen Feldman, of Prudential Sawicki Real Estate, declined comment. An FDIC spokesman said Ms. Bair decided to remove the listing and wait for the market to improve on the advice of her real-estate agent.

That's scary. With this kind of denial we're in for a decade of price declines.

California Tax Credit for New Home Purchases to End

The $100 million dollar fund California set up to subsidize new home purchases via a tax credit is coming to an end. Enacted March 1st, about $95 million has already been used. With the state government in a budget crisis don't count on this getting refunded.

The Wall Street Journal has the details:

To jump-start the ailing housing market, the state set aside $100 million for qualified buyers on or after March 1. With some able to combine the Golden State's bonus with a federal credit of up to $8,000 for first-time buyers, the response has been enormous. Some $94.7 million has been claimed via 9,848 applications, according to the most recent data from the state's Franchise Tax Board.

...not everyone was a fan, anyway. Critics said it promoted building new homes and did nothing to ease the glut of existing inventory.

"All this ended up doing is adding additional supply to the California markets, many of which are among the most oversupplied in the country," Stevenson said.

Visual of Windsor Foreclosure Wave to Come

Via ForeclosureRadar.com, here is an image of 35 bank owned properties in Windsor that have already been foreclosed on:



And here is an image of the 182 homes that have recieved a Notice of Defualt (Green) or already have an aution set for the property (Blue). Most of these will soon be foreclosures:


Don't believe the real estate agent hype that you need to "buy now" because supply is drying up. Clearly there will be plenty more bank owned homes for sale in the near future.

Agent Admits Banks Holding Foreclosures off the Market

In case there was any doubt that banks are trying to create the illusion of limited supply of homes on the market, real estate agent Chris Smith of Santa Rosa sets the record straight in the Press Democrat:

While buyers are snapping up distressed homes, the supply could swell again if banks put more on the market, said Chris Smith, a CPS agent in Santa Rosa who sells foreclosed homes.

“The fact that the banks held foreclosures off the market from the foreclosure agents dried up the supply,” he said.

Some banks held off selling foreclosed homes this spring after President Obama launched an effort pushing lenders to help owners stay in homes, Smith said. Banks also didn’t want to help drive prices lower by flooding the market, he said.

After receiving a handful of foreclosure listings the past two months, Smith received six in the past week.

“I think we’ve got another wave of foreclosures that is about the same size as the first wave that we had,” Smith said.

Expensive Homes will be last to recover, will fall 60% from peak.

While housing at the lower-end of the market is currently selling, there is no such luck for homes in $1 million plus range. As Bloomberg reports:

Prices for the most expensive U.S. homes may not reach bottom for another few years, according to JPMorgan Chase & Co. analysts...

“Currently, we have national home prices bottoming in 2011,” [JPMorgan Chase & Co.] said. “However, prices for more expensive homes may not bottom out until 2012, and ultimately result in peak-to- trough declines in excess of 60 percent (compared to 40 percent nationally).”

“California is probably worse than other states, but higher-priced homes in general are going to be a problem,”

Sonoma County take note.

Finally a sale at Canyon Run?

It looks like 1720 Canyon Run has finally sold. Really this time.

We've followed this home for quite a while so it is interesting to see the price where it settled: $395,000.

But what I decided to do was to graph the last sales price of all 36 homes on the block given that most are very similiar. As you can see after a flurry of activity after construction was complete (1999 and 2000), very few sales pushed prices up in the neighborhod.

This last sale confirms that the trend is heading back down. I doubt we're done yet.

(Note: To clarify the presentation of the data, 12 sales in 2000 means that of the 36 homes on the Canyon Run block, currently 12 had their most recent sale in the year 2000. More than 12 homes could have sold in 2000, but these would have been flipped and sold at a later date. Example: If a home sells for $270,000 in 1999, sells again in 2003 for $423,000, then in this chart its 2003 data is used.)

Walking Away with a 780 Credit Score

Mish just posted a letter he received from a reader. I found these segments telling of what lies ahead:

I am a condo owner who has done nothing wrong. I put money down, I did not buy over my means, and I did not attempt to use my house as a credit card. As a matter of fact, I am still employed and I still continue to make payments on my mortgage. All that said, I am at a loss of over 100K and the banks are unwilling to work with me because of the loss of equity.

I've actually had one loan officer laugh at me when I called to discuss the refi...

...I simply - simply - cannot see a good business reason to continue paying on my mortgage. I try to rationalize the situation, but there is *NO* good business reason. Please understand I say this as a person who has NEVER missed a bill in my life. My credit rating is 780 (averaged between all three agencies). I've always taken pride in paying and making my own way... but I've reached my breaking point.

Remember, 60% of Sonoma County homes sold in the last 5 years have negative equity. This could very well be another driver of foreclosures in the future.

Glass Half-Empty vs Glass Half-Full on Sonoma County Foreclosures

Dave Roberts has a follow-up post on his website taking another look at REO sales in Sonoma County. Head over and give it a read.

The bottom line is that REO sales have picked up and there are currently less than 140 active REO listings on the MLS. Compare that to 187 REO sales last month alone! Good news for sellers, bad news for buyers... right?

Not so fast. Take a look at the graph to the right.

It shows Sonoma County Notice of Defaults, Auctions, and REO data off ForeclosureRadar.com (in blue) and compares it to Dave's active REO listing number of less than 140 (in red).

Clearly there is more supply that is going to be hitting the market. In the last 120 days 1,546 households in Sonoma County received Notice of Defaults. Another 890 have an auction date set for the courthouse steps. Finally, Foreclosure Radar shows a total of 535 REO's in Sonoma County (if you add up Dave's Pending, Contingent, and Active REOs it gets you somewhat close to about 392... does shadow inventory account for the remaining 143?)

Whether this is a glass half-full, or glass half-empty, depends on your vantage point. As most of these NODs turn into Auctions, and Auctions turn into REOs, supply will once again ramp up and prices will continue their fall. Glass half empty for sellers, but for buyers this means more selection at lower prices.

90% of New Mortgages Now Backed by the Government

The Mortgage Bankers Association is in front of Congress today calling for the U.S. government to continue to intervene in the mortgage market. But just how involved are they currently? The WSJ explains:

The government is providing guarantees on more than 90% of new home mortgages through Fannie Mae, Freddie Mac and the Federal Housing Administration.

This clearly shows that the only reason we're seeing slight signs of 'stabilization' in the housing market is because taxpayers are taking all the risk.

L.A. Times on Sonoma County Foreclosures

The LA Times highlighted the recent articles from Sunday's PD on their website and had this to say:

The Santa Rosa Press Democrat noted this weekend that many Alt-a mortgages, a type of variable-rate mortgage sold to people typically better off than subprime borrowers, are now heading into foreclosure in that area. The paper says 18% of Sonoma County mortgages are Alt-a's...

...As Calculated Risk notes in its analysis of the trend, when these borrowers are foreclosed, it may be harder to find buyers for their mid-range houses than for the bottom-end properties that now dominate the foreclosure market. That's because there are fewer "trade-up" buyers who sell a lower-priced home then buy a more expensive one. Sellers of low-end homes today aren't people moving up, but banks clearing out repossessed inventory.

"The foreclosure crisis will now be moving up the value chain," CR predicts.

Press Democrat on Alt-A and Option-ARMs

The Press Democrat published three articles on the mortgage crisis on the front-page of Sunday's paper authored by Michail Coit. Head over and give them all a read:

Ticking time bomb for borrowers in pay-option loans

Alt-A loans: Second wave of foreclosures ahead

and

Bank convinced SR borrower 'pay-option' loan was best

This line even surprised me:

Today, there are 18,000 Alt-A mortgages in Sonoma County. They account for about 18 percent of the county’s 102,000 home mortgages — triple the U.S. average, according to First American CoreLogic, a real estate research company.

This is an enormous amount of low doc loans and leaves little doubt that we're going to see more declines in Sonoma County real estate prices for years to come.