"There are areas in some parts of the country where property values are quite low, and there are no large-scale expectations of them going up. They don't know that they will ever recoup those costs," and so the lenders never re-take title to the properties, allowing them to become derelict." (emphasis added)
There you have it: Abandoned, Non-REO Foreclosures.
The local market conditions are what seems to determine the abandonment decision. In a region where the job and real estate market is doing anything better than "a little soft," I would surmise that abandonment makes no sense at all.
However, at a certain point, in a weaker region, with declining neighborhoods, certain lenders might make the decision to simply walkaway from a large swath of (potential) real estate holdings, on the simple basis that it might be cheaper to do so.
There are very significant costs to this. Consider what the potential impact of these property abandonments by the lender means:
- Total write off of the loan; - Boarded up homes / neighborhoods; - Loss of tax revenue to the local school district or town; - Long delays before the local town, municipality, or state can take possession due to tax arrears.
Thus, these incomplete foreclosures/abandonments can have very significant impacts.
If this becomes widespread, we could be in the process of creating an entire new universe of suburban slums . . .
Actually, I suspect we would end up creating an entire new universe of legal restrictions on just how a lender can handle an REO, or how rapidly a state actor can take possession. (via Instapundit).
The Sacramento SPCA...is seeing a dramatic jump the number of animals being surrendered by owners who are going through foreclosure...During the last four months of 2007, the Sacramento SPCA took in 176 dogs and cats from people who said they were surrendering them due to "moving," said [Director Rick] Johnson. That is 100 more than the same four months in 2006. Johnson doesn't see the situation getting better any time soon.
This is weird. I never considered it at all, but it does make a horrible kind of sense. People living in homes are usually able to have pets, but if they are forced to move to apartments, far too often the rules forbid pets.
Without making any judgments on the housing problem itself, imagine how it must feel to lose your home and a beloved pet at the same time.
Trulia Inc. said Wednesday it added foreclosure properties to its online database of residential real estate listings.
San Francisco-based Trulia said users who enter their search criteria on homes for sale in any U.S. market will now also get foreclosure information provided through RealtyTrac Inc.
I imagine that foreclosure speculation will be the next wild west frontier of the get-rich-quick scammers in the real estate biz. I also expect that such speculation will be a perfect way to burn yourself into a smoking cinder.
In October, those numbers dropped to 36.1 in Alameda, 36.7 in Contra Costa and 11.9 percent in Solano. The drop in jumbo loans made loans of less than $417,000 rise 12 percent across the Bay Area, LePage said. Although every market showed a drop in all home sales, there are discrepancies among Bay Area counties.
San Francisco had the lowest drop in sales Advertisement with 8.2 percent fewer, and Solano and Napa dropped more than 50 percent from last year.
As I've been predicting all along.
But even San Francisco will continue to drop, albeit considerably more slowly than the rest of the Bay Area, for the foreseeable future. Which is why I don't understand the continued denial I see in the comments of a lot of real estate blogs, to the effect that the time to buy is Right Now, because prices have bottomed.
No, folks, they haven't. Buy a house if you have to for employment or other reasons, but don't buy to get rich quick. Those days are over, at least for a good while yet.
A San Francisco Bay Area homebuilder can't sell all the houses it built in a development in Manteca. Current residents paid up to $630,000 for a 3-hour round-trip commute. But now they're auctioning the remaining homes, starting at a more realistic price of $285,000. [That's a 55% haircut - Ed.]
This headline is going to have a huge impact because it means every homeowner in the SF Bay Area who thinks they have a $630,000 property now will begin to realize that in the end, if they want - or need - to sell that house, they are going to be competing with $285,000 prices. Let that sink in a while.
I live directly across the street from the gigantic new Lennar development - 1600 units - purportedly going into the old Hunters Point Naval Shipyard. Lennar is committed to making 30% of those units "affordable," whatever that turns out to be when it comes time to market them. The rest - over a thousand units - will be dumped into a market flat on its back around 2009. Given that the City has basically put up nothing but the Shipyard land, which it acquired for zilch, Lennar is shouldering most of the risk on this project. At this point, one realistically has to wonder when - if at all - this thing will actually get built. And even if it is, who will be buying it.
As Economy.com says this week, “The market for new homes is dead for all practical purposes. Eighteen is the lowest rating in the history of the index. The seasonally adjusted numbers are also the lowest on record for October for every subcategory, as they have been for each month since spring began. The bottom of this market will not be reached until there is another significant decline in the cost to prospective buyers, both in house prices and mortgage rates.”
All the happy talk about having reached the bottom of the housing crash is just that: Happy talk. We have a long way down to go yet. Next stop?
The firm's services, which include managing auctions, are sorely needed in today's soft housing market, Gollinger suggested in a statement.
"A paralysis exists within the current real estate market, and our strategies will create movement through the use of conventional and accelerated marketing programs, releasing the paralysis and accelerating absorption for our clients," Gollinger said in a statement.
Throwing residential properties onto the auction block could, I suppose, technically be called "marketing," but I doubt many of the sellers will really appreciate the method.
The implosion of the mortgage and housing industries has caused the East Bay's job market to stall.
The East Bay economy, which as recently as a year ago was bolstered by the startling growth of the housing industry and its satellite sectors, now is struggling to produce jobs on a consistent basis, according to a state labor report released Friday.
"We are in a housing recession in Northern California," said Scott Anderson, a senior economist with San Francisco-based Wells Fargo Bank. "I see the fingerprints of the housing slowdown in a number of industries."
Despite all the rosy economic forecasts circulating for California these days, I don't expect any economic sector to remain unbruised by the collapse of the enormous housing bubble that ballooned here. We are still pushing into the collapse. The worst isn't over. It is yet to come.
Even as Bay Area home values weaken, a new report shows rents are soaring - indicative of the curious mix of a sturdy economy and a faltering housing market.
Average monthly rents in the region's financial and high-tech hubs have jumped more than 10 percent in the last year, and occupancy rates hover around 95 percent, according to a quarterly rental survey by RealFacts.
While robust hiring is boosting apartment prices, the purchase side of the market languishes amid the subprime crisis and a supply of homes for sale that far outstrips demand.
"We have very strong employment, and typically it increases demands for rentals and raises home prices," said Michael Carney, director of the Real Estate Research Council of Northern California. "But because we've had these problems with the mortgage market, the shift is toward rentals."
The average rent for an apartment in San Francisco stood at $2,243 in the third quarter, up nearly 12 percent from one year ago;
Would-be SF residents continue to be caught between a rock and a hard place, as far as housing costs go. While real estate prices are holding steady high in the stratosphere, or falling only slightly - real estate itself is much harder to buy thanks to the utter destruction of the sub-prime mortgage option. Yet rents are beginning to skyrocket again.
What it all boils down to is that in the SF Bay area, people are going to find themselves allocating more and more of their income to keeping a roof over their heads. Which means they'll be spending less and less on all those things that create "strong employment."
On the other hand, the way things are changing, you may find such a drastic step unnecessary. What with the new online-oriented RE outfits - who are currently in a commission-slashing war with old-line agents as well as with each other - it may not cost you an arm and a leg to let somebody who knows what they're doing peddle your place for you.
Urban markets like New York and San Francisco are bulletproof to housing slumps. Both housing economies are overly dependent on one business sector and a few bad quarters on Wall Street or a tech bust would cause them to slump.
This goes against the current grain of thinking, but I have said here repeatedly that while the city of San Francisco has certain factors that will tend to support prices more strongly than elsewhere in the Bay Area, it will not be entirely immune to the collapse of the bubble, which ballooned prices here as much, if not more, than anywhere else in the country.
In particular, the signs are not good for for the business cycle in general. The current cycle has peaked, and more than just the housing market are contributing to the gradual erosion of the boom economy. Look for unemployment, particularly in the tech sectors, to grow over the next three quarters, and look for the stock market to contribute by entering its own slump. These two factors, coupled with the growing influence of housing on consumer spending and confidence, are likely to lead to at least a quarter or two of recession, probably as the 2008 election draws close.
When all is said and done, I'm looking for a drop of 15-20% overall in the median price of a SFO in San Francisco before the worst is over.
Several months ago, Eugene Wright found a foreclosure notice posted on the door of the three-bedroom South San Jose house he and his family had been renting since January. He called his landlord, who told him not to be concerned. It wasn't until a real estate agent showed up in July to tell him that a bank had repossessed the house that he realized he had to move.
Given that about two-thirds of SF's residents rent, this sort of thing would have the possibility of causing widespread chaos. But SF's rent control laws don't permit evictions except for "just cause," and the permissible causes don't include foreclosure.
Breathe easier, San Franciscans. You'll miss at least this much of the potential horror of a bubble collapse. The banks may not be too thrilled, but frankly, banks are pretty low on everybody's pity list.
Here is a graph of starts and completions. Completions follow starts by about 6 to 7 months.
My forecast is for starts to fall to around the 1.1 million units per year level; a substantial decline from the current level. Goldman Sachs' forecast is for 1.1 million units, and UCLA is for 1.0 million units.
Of interest beyond the possibilities of further considerable drops in housing starts, is what the graph may portend about the possibility of a recession.
And if we move into a full blown recession, the last remaining support for the Bay Area housing market - jobs - may abruptly vanish.
First the National Association of Realtors (NAR) pushed for exotic loans to keep prices rising. Then they redefined the way affordability is calculated so that housing looks more affordable than it really is. Then they demanded that the Fed lower interest rates. Then they backed the asinine Bush housing bail-out proposal. And now they are pushing for raising Freddie Mac's and Fannie Mae's portfolio caps:
The NAR is no different than the old railroad companies or, more recently, the US automakers. The key is not working harder, smarter, and with greater innovation. It is being able to leverage a government bailout.
In Northern California, the number of notices increases from 636 to 849 (31.4 percent) in Sacramento County and from 73 to 106 (45.2 percent) in San Francisco.
Most of the versions of this article I've seen lean hard on that 45 percent increase in defaults in San Francisco. Only Inman bothers to tell you that represents an increase of only 33 homes in San Francisco.
SAN FRANCISCO If you're one of the many Americans who snatched up homes as investment properties in the booming real estate market, now might be the time to sell, according to Jim Keene, co-author of "Retire on the House."
"I'd say sell some of those excess properties, particularly in some of these more volatile up-and-down markets," Keene said in an interview with MarketWatch.
Keene, a chartered financial analyst, is also a regional manager with Wells Fargo's private client services, in Walnut Creek, Calif.
Of course, any real-estate discussion requires a nod to locale: Where you're buying a home makes a difference. But it also matters which part of the market you're looking at, the upper bracket or the low side.
Higher-end homes are likelier to see prices easing while lower-priced homes in less-volatile areas may still enjoy some gains, Keene said.
There aren't all that many "low side" homes inside SF, although I happen to live in one. I think we may see prices slide a bit more steeply outside The City than inside, though. There are other factors working to prop up prices here, including a screaming shortage of homes. The market has softened a bit here, but I haven't noticed any real price depreciation as yet.
That said, it's wise to keep in mind that when you start seeing articles speculating that "maybe it's time to sell," the time to sell was probably three months ago. Or six.
