Economists and journalists are forever comparing this real estate slump to the ‘90s. Well, in one serious way, this downturn appears worse: monthly foreclosure totals are increasing more quickly, DataQuick numbers show.
For example, the total of foreclosures in a single month first broke 100 in this downturn in October 2006 with 104 foreclosures. Twelve months later in October 2007, the total broke 500 with exactly 530 foreclosures.
In the ‘90s, it took 55 months to go from more than 100 to more than 500 foreclosures in a single month. By that one measure, foreclosures are rising more than four times faster this time around.
I use 100 foreclosures in a month as a minimum starting point, because I figure anything less than that is too small of a number to rely upon.
And it just so happens that in both the ‘90s and this downturn, the first quarter to have three consecutive months with more than 100 foreclosures was a fourth quarter: 1991Q4 had 442 foreclosures and 2006Q4 had 327 foreclosures. Starting from there, I compared the quarter vs. quarter gain as a percentage, meaning 1992Q1 vs. 1991Q4, for a 17% gain compared to 2007Q1 vs. 2006Q4 for a 59% gain in foreclosures.
I can only do that for three quarters in 2007 (the red bars in the graph below), so I only did it for three quarters in 1992 (the blue bars in the graph below). I would have done year over year instead of quarter over quarter, but I don’t have enough data points in this downturn yet. When I do, which will be next year, I’ll do another graph. Let’s hope the result is less dramatic.
I thought Foreclosures were not going to affect this market at all????????
Where is Gary Watts when you need him, please interview that guy again
Time to Buy!
Media spin and bailout will only cause more damage and lengthen a healthy housing correction. Feel free to take more morphine.
We are responsible for our own decision. There’s plenty of pain left to come for homeowners and investors.
But even if we don’t know when it will end, we’re getting a much better idea of whom to blame. It’s a collection of regulators, Federal Reserve, Wall Street titans, Fat Cat Banks, Greedy Investors, and Lenders. Instead, they chose either to enrich themselves or to look away as others did from the beginning.
More foreclosures are on the way. Housing is not a bubble until it busts.
ihatelansner dude shut up and go buy a house
Time to Buy? “ihatelasner & G.W. Bush” must be a seller. No one is buying this year and most likely not next.
Nice try.
rants go back to the real estate section!
Prices have a long way to go.
The housing problem is fault of of banks and real estate companys
What about the number of homeowners as a ratio in 1991 compare to 2007 ? Should’nt you have factored in the thousands of more homeowners that exist in 2007 as an offset to the percentages you have calculated ?
People getting option arms at Countrywide now have to qualify at above the fully indexed rate again. I believe this is how things used to be back in the “old days” of these loans. Index + margin + some additional amount instead of the 1-3% teaser rate. I think soon all the neg ams will be this way since investors won’t want to buy loans where people are qualifying at 1% rates. Also, the loan amount for qualification will be 115% of the real one. That won’t help either. So that means almost nobody will be able to get that loan now except for the wealthy who want to pay the minimum and invest the savings each month, which is who the loan was designed for anyway. People won’t be able to use this gimick loan for an affordability tool anymore and that will eventually help reduce the number of foreclosures. But I agree that it could be a year or two before things really improve much. There’s too many of these loans still to recast over the next few years and many people can’t refi out of them because they don’t have the equity.
Time to sell and start looking for bargains in 2010+
The time to buy is when everthing is tanking? Good thinking. Go buy a house then, Einstein/ihateeverthing.
The loan belt is tightening, this is a good thing as it will keep people that cant afford a home from being able to get a loan that they will eventually default on.
Home buysin will finally go back to where you have to work to get a house, this involves improving your credit rating, saving money for a down payment, and pushing home prices back down ro reasonable lvls.
So all you that want to buy a home its time to start saving and laying the paving stones so you have a path to get to the american dream.
Home buying is no longer a drive thru business, at least I hope because history shows humanity repeats its mistakes….
David:
Secured Funding and Argent used to qualify borrowers on the fully indexed payment for a Neg am loan…the problem was the income was so overstated it didnt matter!
There’s always a way to get around it.
And this will make the prices of homes plumet s more and more foreclosures come on the market and the lack of available loan programs will force all homes to stay on the market longer resulting in even more foreclosures as homeowners will not be able to sell resulting in even more people walking away.I was therein the 90’s!
Lou Pacific
Real Estate and Mortgage Company Consultant
Serving OC for 30 Years
In response to jsquid,
Yes, housing stock has certainly increased since 1991 as have the number of homeowners. I’ll look more closely at that.
However, the number of homes sold any given month in 2006/2007 is similar to the 1991/1992 pattern, with sales ranging from 2,000 to 3,000 homes each month. To be sure, in 1991 there were some months with less than 2,000, including 1,442 sales in Feb. 1991 and 1,604 sales in Jan. 1991, though they were exceptions. Monthly sales were as high as 3,598 in May 1991. In 1992, sales varied from 1,474 (February) to 2,926 (December).
In 2006 and much of 2007, sales stayed in the 2,000 to 3,000 range. However, last month sales dipped to 1,700.
The bottom line is if sales are at a similarly low level this time around as the ’90s, as the trend is showing, then the same amount of foreclosures could have an equivalent impact now as then despite a greater housing stock. We’ll see.
It has never been a better time to BUY A HOME!!!! Why wait? The best deals won’t last. It is the American Dream to own a home, and not only are you denying yourself the euphoria that comes with OWNING A HOME, but you are being un-American. If you love this country, prove it by investing in her by BUYING A HOME! It is the inalienable right of all Americans to own a home. COUNTRYWIDE will help you achieve the American Dream. No income verification, no/bad credit OK!!! We will take you at your word. Look, INTEREST RATES HAVE FALLEN AGAIN!!! What, you didn’t see the pop-up banner ad of the two cows dancing in their cubicle? Look, damnit, sitting on the sidelines is undermining our economy and damaging our national security. Be a good American, a loyal American, and JUMP INTO THIS RED-HOT REAL ESTATE MARKET WITH BOTH FEET!!!!
Did I say we won’t even ask for a valid ID? NO PROBLEM!!!!!
I just got back from Thanksgiving weekend with the side of the family that lives up in Portland. It’s a beautiful city, lauded as a brilliantly planned “smart growth” eco-friendly green hipster heaven. The last six years they’ve built thousands of units of trendy condos and lofts in the artsy neighborhoods around downtown, and linked them all with new politically correct native species parks, politically correct electric streetcars and light rail, and politically correct trendy shops and restaurants serving organic soy milk in their 5 dollar lattes to all the painfully hip “progressive” people that live there. Know what the story on the front page of The Oregonian was this morning while I waited at the Portland airport?….
The trendy-green, luxury condo market collapsed in the last 90 days, buyers are fleeing their contracts in droves, and developers are frantic to hold on to the $5,000+ deposits put down by the hipsters last spring as that’s the only income the developers are going to be getting anytime soon. The hipsters are mad, as they want their deposit money back. The developers won’t budge, and are keeping the checks that were written six months ago.
30 story condo towers are now nearing completion in Portland without any residents lined up to live in them. Even Starbucks is backing out of plans to put stores on the ground floors because no one will be there to buy a mocha for years to come. Just like Lennar is doing in Irvine and Anaheim, Portland high rise condos will be put into mothballs and sealed for the forseeable future until someone wants to buy one. And they won’t even give the $5,000 deposit back because they are so desperate for cash! It’s not just an OC phenomenon, it’s happening to different degrees all over the country.
It’s going to get bad this winter in OC. I’d bet a 5 dollar organic soy latte’ on it!
Kim you’re right. But the stated programs either have gone away or soon will. I forgot to mention that the people need to qualify full doc.
chicken little your name fits you
Troy,
I think your right. It looks like everything will be affected by this slow down, not just housing. For 5 bucks you might get 2 of those lattes if things get bad enough and still not many will be able to afford them.
I’ve heard the claim that because there are many more homes in 2007 than in 1991, the number of foreclosures are not significant. I would argue this. The number of sales projected by CAR for next year is 334,500. Last quarter, California had about 72,000 NOD’s. According to Data Quick, about 55% of these now go all the way to trustee sale with 97% of them converting to an reo. Let’s do the math. 4×72,000 = 288,000 nods x .55 -= 158,500 trustee sales x.97 = 153,648. Let’s assume that CAR has once again over shot how many homes will sell by 10% {it was 20% this year]. If you have only 300,000 total sales and over 150,000 of them are reo’s, you have the worst ratio in California’s history by at least 50%. The worst previous year was in 1996 with 33.5% trustee sales/sales. Consider the 500 house auctions which are becoming common. You could have a 500 house auction every weekend and sell only 26,000 out of the 150,000 plus reo’s. There’s a significant event happening Feb. 10th. One of the auction companies is holding an auction with 30% of the inventory sold absolute. The word absolute means what ever the final bid, that’s the final purchase price. There will be at least 6 major national auction companies competing to sell houses in California next year. I would bet if one of them goes “absolute”, they all will follow suit.
If the bulls can answer one question, maybe I too will become a bull again.
If everything is so great, bottomed out and all, why don’t they bring back the subprime market that has been taken away?
Now that is impressive, we have Bruce Norris commenting on the OCR’s mortgage blog.
Sadly, no one will listen to him, because he is just another “crazy” bear. That is too bad, because what he says is true about the foreclosures. And, I have the chart to prove it. The sales to foreclosure ratio is approaching a record level. The speed at which it is happening is unprecedented. Of the 35 homes at the Santa Ana courthouse auction today, 1 sold, the rest went back to the bank. One home, in Ladera Ranch, went back to the bank for less than what they were selling for brand new in 2003.
Bruce - I hope you post more often. Your data points nail it on the head.
Bruce,
Do you have websites for the auction houses?
Thanks
Bottom of the market will be about 2012 to 2015 if the Depression does not arrive! OC & LA’s multimillionaires will drop from 2.5% of the population to under 1.5% in a recession. If the depression is declared, under 1% will remain as multimillionaires! If you have real estate, your loosing 10-15% a year in depreciation & 10-15% a year in costs and maintenance (-cash flow).
The housing downturn tsunami is on the horizon now, we can see the crests. This year’s bank write downs are from the late 2006 and Spring 2007 defaulted loans. It takes 3 missed payments and 3 more months of process to pass the default impact to the market / investors. From March 2007 to Oct 2008, there are approximately a total of $ 1,070 billions of ARM loans to get their FIRST rate re-set. This includes new mortgages, home equity loans, lines of credits, etc. Many of the borrowers have prime credits and been living in their homes for longer than 10 years with good equity. But the overall U.S. economy slowdown (recession !!) will make even the most credit worthy borrowers difficult on their loan payments. The recession has finally set in and no one is imune from it. The real large force behind this tsunami is the combination of home equity loans, 2nd and 3rd mortgages, lines of credit, credit card debts, auto loans, etc. For those who have lived beyond their means of normal income, this is the time to pay the dues. If I had a 20-year old house in O.C. with $500K equity but on a $400K ARM loan, I would either refinance to a fixed higher rate loan, or sell that old house to cash-in the DIMINISHING equity then rent. With so many home owners having difficulty to pay mortgage, they would rent out their 2nd homes as soon as possible. Sell at lower than market prices (to cash in quickly) then rent cheaply is the best strategy. I have some west of I-5 rental units in North San Diego county, but with so many competitions around, I could not raise rent for two years. I guess many people have already put their invesment houses on the rental markets. So, beat the crowd by cashing in equity then rent cheaply, this would help youselves and the rental markets.
republicans ARE traitors do you know how old Mozilo is, hes a old dude, if you were his age would you have a plan set out to sell your stock options? Seriously there was an informal investigation so if he was doing anything illegal dont you think they would have found something and it would be in the news?
I love how people target and put their focus on one mortgage company and conveinenty forget about the many hundreds of others that originate loans.
I do agree with you, no bail out, but people need to take their heads out of the ground and realize that everyone is to blame.
The sob stories of all these people “Claiming they were duped” into their loans is a load of crap.
The truth is if they had made a responsible decision, read the loan docs and made sure they understood them they woudl not be in the quick sand situation they are now in.
The only people I feel for are those that got into trouble due to lost job, illness or fators out of their control and stupidity is not a factor out of peoples control.
Shadow,
He was old a year ago but he wasn’t excercising options like no tomorrow while stealing tax dollars from government agencies. I use him as an example of the greed and unchecked corruption from the republican party. Republicans in the banking sector allowed Countrywide to start a bank, rather than just a mortgage company. Now our tax dollars fund his bailout under the guise of saving the banking industry.
The other mortgage companies are guilty as well, but none of the other companies have private meetings with Ben Bernanke and his merry band of money printing republicans. None of the other companies can get 50 billion dollars of unsecured loans (tax dollars) in one month while their stock price is tanking.
And NO!, Christopher Cox has not found any wrong doing by anyone. I guarantee you he won’t find any at Countrywide. Doesn’t mean it is not there. Cox will be exposed just like his fellow Lincoln Club Members Street, Corona, Heidl etc etc.
Hey, whatever happened to Jimmy? Back in October he said:
“Bottom line: The foreclosure problem in OC has been greatly exaggerated. The minor foreclosure problem is not worth discussing.”
I want to buy a home in the OC. But 10% reduction in price is still 200% higher then it was in 3-4 years ago. But my income isn’t 200% higher. So until they prices really adjust back down to a normal level based on income, the numbers don’t mean anything. When you are in a bubble market these 10% don’t mean anything, they are just hype for Realtors to try and sell homes. Look at 10 year graph of home prices and you can clearly see they are overvalued.
republicans ARE traitors, one of the reasons CFC stock has tanked in the last month is because these stupid yahoos that spout uneducated rumors that countrwide is filing bky, it has happened twice and both times CFC stock has dropped by 3-4 dollars and hasnt recovered, if these duch bags keep doing this coutrywide stock will hit bottom what them they turn their attention on other companies,
The people sputing this junk need to be held accountable they are only helping make the situation worse both for the people that hold CFC stock, but the company and any number of other people with a interest in not losing money. This applies to all companies that take hits because of the dribble these people spread around.
If it wasn’t for my tax dollars, Countrywide would have already filed bankruptcy. That is NOT one of the reasons Countrywide has tanked, that is one of the dumbest comments I have ever read. Truly, I am dumber for having read your comment.
republicans ARE traitors you are not dumb you are just dense, im not talking about the whole mortgage situation or where and how Countrywide got to where they are, I was talking about stock prices and how they take a hit because of rumors, If you cant see cause and effect you need to go back to school.
every time some chump announces countrywide is going to file bky their stock tanks by 3-4 bucks and it doesnt come back to where it was before the chump chant of bky.
Seriously dude get a clue if you cant see that then you are blind..