Builder consultant Real Estate Economics in Irvine has this to say about their outlook for SoCal foreclosures …
“Foreclosure activity has moved sharply upward during the past five quarters. Unfortunately, during the next four quarters, foreclosure activity will worsen before it improves. … foreclosure activity during the past quarter (was 9,963.) By third quarter 2008, the level of foreclosure activity will (be 11,538) homes. The impact has been, and will continue to be, a contribution to the current over-hang in housing inventory and reduced home price support. Unlike market priced comparables, much of this added supply will be offered at below market pricing in order to move inventory quickly. Unlike in past cycles where foreclosure activity was a reflection of job losses, foreclosure activity in this cycle is largely being caused by small-time speculators who are giving up their investment positions, often walking from 5 to 10 homes that were bought on speculation. Loose lending practices did allow many non-qualified households to enter into homeownership before they were ready, but these new homeowners will fight to stay in their home, whereas speculators will give up their positions without as much concern.”
“Despite the negative impact of foreclosures, it should be noted that foreclosure activity will not be the primary market driver. Economic growth will continue to be the main driver as prices approach a floor wherein they can be supported by Southern California’s economy.”
I was talking to someone who’s involved in REO’s & short sales.
Interesting points he made:
There are huge problems because the banks have not adjusted to this market.
He said a buyer will make an offer on a short sale, and it generally takes several weeks before the bank will accept or make a country offer, but by then, the inpatient/nervous buyer has moved on to another property.
The banks are still pricing their inventory at 3 month old comps, which are no longer applicable.
There’s not enough transactions … no one has an understanding of what a home is really worth in Orange County.
One more unsupported assertion for the industry to be suprised by…
“Loose lending practices did allow many non-qualified households to enter into homeownership before they were ready, but these new homeowners will fight to stay in their home, whereas speculators will give up their positions without as much concern.”
When this hypothetical unqualified homeowner is 1-2 years annual salary $75-150K underwater, they will walk as fast as the speculators.
Any rational person would.
That is the dirty litle secret of this bubble, nearly all buyers were speculators and the magical perpetual appreciation number made it worth it. Without perpetual appreciation not so much…
did they say “economic growth” will be the main driver???
last time I checked we are actually losing jobs- at least the
higher paying ones –see the mortgage industry for reference– just what mysterious industry is going to replace
those jobs? answer none
as a side note how are lenders going to feel about making
loans on an “asset” thats going down in value- like the
houses here in the OC? just curious about that one minor
detail that no one seems to mention
A 16% rise is extremely unrealistic.
Depending on the county it is up 30-800% over last year, and all signs point to it becoming much worse. In fact, an increase of 16% is probably a low estimate for NEXT QUARTER, not next year.
Well, the banks still don’t know that 85% of the folks live here do not qualify for the jumbo loan and the other 15% that qualify already have a house so how the heck are they going to sell when no one can afford to buy.
If the tragic SoCal wild fires destroy many homes, there will be a huge housing shortage. Inventory will be falling rapidly.
Jimmy, people are fighting and hoping to save their dream homes, and you are wishing to destroy that. You are not belong here in OC.Just leave
No Way, it is a fact. Sales inventory will be absorbed by many looking for shelter. It is fortunate there are homes for sale, but I don’t think there are enough. Hopefully, the available supply does not run out before all get a new residence.
Like people can just go out and buy another house any old time they want too, you still have to pay the mortgage on the old until you get the check and that goes to the bank. If we loose a few it may hurt our values not help, nobody wants to go through this type of thing every year. We went through the baldwin hills fire, didnt get touched and it didnt help values, so its not a good thing.
We have 19k or more for sale we could loose 1500-3000 and it would help our sales and reduce inventory and give some hope but thats it.
This is not a time to wish bad luck on good folks.
fire is a tragedy not an investment strategy. good news is that oc building codes prevent families from losing their homes. please thank all of the fire fighters and volunteers for all of their hard work.
Lee, you are correct. I’m an REO broker as well, and the lenders are driving us crazy with their guidelines, but this is how lenders determine whether or not to accept a bid:
Is the offer within 5% of the last comparable averages taken within 6 months?
Lenders WILL NOT ACCEPT less than what the comparables show, and unfortunately, the comparables are still very high because many of them were made in 2006. Stupid? Yep, but that’s the guideline for now.
SO, if you are a buyer looking to buy an “REO” home and think you can low ball the bank, forget it. Any offer less than 5% of the listing will be rejected by the bank.
I think Jimmy was the one who set the OC fires in order to increase demand for OC housing.
Jimmy’s fire-mongering at a time like this is abhorrent
I will ignore statements by m and shiny. The Cal govt needs to monitor insurance payouts. It was a shame how the insurance industry wiggled out of Katrina coverage. Hopefully, the state has lawyers looking at that now.
Jimmy:
The only homes in the OC that will be destroyed are:
The ones so deep in the canyon they needed their own propane tanks
My good friend is a OC Firefighter and lives in Foothill Ranch.
Witing Ranch wilderness park was on fire,
Their community was evacuated on Monday,
They are all back home now and he believes,
No major developments will be hit.
This fire will be wrapped up by sunday.
You will use anything to support your ill-gone conclussions.
I used to like reading your bloggs because:
You and I are some of the only bloggers I have come across that:
Are landlords and own multiple homes.
These last statements were way out of line.
Read my blogg on lancer as,
I have taken in my tenants family,
Who have been affected by this terrible tragedy.
Maby as a multi millionair you should want to help people,
Not bang your own drum!!!!
I saw the reward for the arsonist is 50K. This is not enough. I think this should be bumped up to 500K or higher. At that price, someone will turn in the scum. Can the OC register kick in? Show your money and help the community. Who ever lit those fires needs to be put away for life.
Also, the San Diego fire is the one that really upsets me. A mega reward is needed. The OC register should support a reward for the OC and San Diego fires. Step up to the plate. The damage in OC pales in comparison to that in SD, and it is really a single community that does not stop at the county line. Mr OC register, do it now. 500K reward for OC and 500K for San Diego.
The worst has yet to come. You have not seen US Housing Report, specifically California, in October, November, and December 2007. Housing slump will break one record after another. Guaranteed.
Do not let all the hype and temptation to lure you into buying a house. As soon as you move in, your American dream becomes nightmares.
This foreclosure article may be misleading. Consider a few quotes from dqnews.com released today.
Quote #1
Right now, most California neighborhoods do not have much of a foreclosure problem.
Quote #2
In Los Angeles County it was 63.3 percent of the first-quarter 1996 peak.
Quote #3
Half the state’s default activity is concentrated in 293 zip codes, almost all of which are in the Inland Empire and Central Valley.
Bottom line: The foreclosure problem in OC has been greatly exaggerated. The minor foreclosure problem is not worth discussing.
The % can be misleading too. Sure they are up 16%, but from what levels (e.g. historically low levels)? I would be more interested to know how foreclosures (% of outstanding mortgages) compare to say the mid 90s. I expect that they are still relatively low at the moment.
Foreclosures and short-sales are widespread in OC. I am looking into one market, Laguna Hills and more than 50% of the SF detached homes in the $600k to $800k range are either REO or short sale. I viewed the properties and asked for a Chicago title report from my realtor. One example, 4B/3BR home for sale $719k, they got a $845k mortgage on 11/01/2006. They probably have stopped paying $7000+ mortgage a month. Umbelievable.
I think banks might yield a bit. I saw a REO, attached home for $470k, next door home (identical) on sale for $570k. The going rate was $630k only 6 months ago.
My neighborhood is about 30% off the highs of summer 2006. I’ve lost equity, but I’m fortunate not to be upside down and only owe half of my home’s current value. I’d like to express that even in this light, I’m more glad that more people can afford housing today than 12-18 months ago, and I hope the best for those who have been locked out to finally be able to make the numbers work and get a home here.
Best wishes to all newcomers who’ve been waiting and congrats to the bears for the last 12 months who’ve held out!
When a bank forecloses on a home and takes back the property, is that considered a “sale” and added to the home sales statistic for the county?
These companies are NOT going to reset the interest rates when they come due next year
Countrywide Financial Corp., GMAC Financial Services, Litton Loan Serving and HomEq Servicing.
If you dont want to get burned, you better hurry SELL these stocks before they tank