On Sunday, we discussed the shift in foreclosures from sub-prime to prime, via the NYT. This morning, the WSJ jumps in with this column: Number of Foreclosed Homes Keeps Rising.
"The number of foreclosed homes owned by lenders
continues to rise despite signs that they are increasingly willing to
slash prices to sell those properties.Lenders and investors in mortgages owned about 660,000
foreclosed homes in April, up from 493,000 in January and 231,000 in
January 2007, according to First American CoreLogic, a research firm
based in Santa Ana, Calif., that collects data from lenders and county
clerks. The April total works out to about one in seven previously
occupied homes available for sale nationwide.A surge in defaults has increased the inventory of
bank-owned homes, known in the trade as REO, for "real estate owned."
By cutting prices, lenders have managed to increase sales of such homes
sharply in recent months in some cities hit hard by foreclosures,
including Las Vegas, Detroit and Sacramento, Calif., local real-estate
brokers say."
More inventory = lower prices = no bottom yet . . .
>
Source:
Number of Foreclosed Homes Keeps Rising
Lenders Cut Prices To Jump-Start Sales As Inventory Grows
JAMES R. HAGERTY
WSJ, June 2, 2008
http://online.wsj.com/article/SB121236060176236293.html
It’s too bad the fed doesn’t have a facility where you can put housing inventory at one end, and get out oil at the other. might solve all our problems!!
yeah. right.
The Fed is trapped at low interest rates into the indefinite future.
Rate resets have not bit as badly as the would have in a normal interest rate environment. Imagine the scale of defaults that would happen if rates were 5 or 6%, or if the inflation killing rates of Voelker were imposed!!
And we still haven’t entered the period of numerous AltA resets.
It will be a long trough.
the WSJ said:
The April total works out to about one in seven previously occupied homes available for sale nationwide.
analysis: I think the author might want to rework this sentence and the paragraph it lives in. Does it mean that 1 in 7 empty homes that once had occupants is for sale? If so, what about the other 6? Are they just sitting there?
Does it mean that 1 in 7 homes is for sale … not on my street. 1 in 7 boats for sale nationwide I might believe.
Is 1 in 7 homes nationwide in foreclosure? Given the count of 660,000, and that foreclosures take maybe 4 months(?), then the maximum potential in 4 months is 2,500,000 bank owned homes if nobody every buys another one. That might be 1 in 7 in New York City, but not the entire USA.
True, housing sales appear to resemble a fur ball that the cat can’t quite hack up but won’t quit trying, but this author need to rework his story a little.
While banks may be pricing houses reasonably, their response time to offers is completely unreasonable. I’ve had buyers wait 6 weeks for a response to a short sale offer to receive absolutely no feedback. At some point the buyer needs to make a decision if they can continue to wait longer while the bank drags their feet. In many cases, they cannot, so the buyer moves on to a “normal” property. They negotiate with the seller within a day or two and can then close in 30-45 days.
The black hole at the REO departments at banks is a drag on the entire process of moving properties. It’s unfortunate for all parties involved.
Wage inflation (the previous post) or the lack thereof and continued problems in housing are tied together. If wage increases have not kept pace with inflation and inflation is growing, how can the housing inventory be cleared expeditiously. Obviously, it cannot be cleared until buyers have some loose change in their pocket to pay for larger down payments, etc. This menas that housing will continue to stagger along on a slow slide to nowhere.
Bah, lowering the rates might have helped people out by decreasing the hurt when their payments reset, but the inflation that’s resulted will eventually produce the same result. A low house payment won’t matter if the cost of everything else has increased enough to burn through all your cash.
I appreciate larster’s comment. As Barry mentioned earlier, wages are stagnant. At this point, the establishment of this nation has no idea how to tackle this problem. Over the last ten years housing prices have maxed out the two-income household. For most households, there is no money on the sidelines for buying increasingly expensive houses. I’ll guarantee our buddy building houses out in Mizzou has no idea how to build an affordable house without ever-more flimsy materials, ever-cheaper immigrant labor, and shoddier workmanship. (Just make the sheetrock thinner and the put the studs another half inch apart.) I honestly believe the income-housing situation in this country has reached a crisis of almost insurmountable proportions. It’s an economic conundrum on par with abolition of slavery. It literally going to have to collapse and be born anew. On this track, most home owners will be lucky (and I mean *lucky*) if in 20 years their cash-out value breaks even with inflation.
cinefoz,
“Does it mean that 1 in 7 homes is for sale … not on my street.”
Which is why one doesn’t rely upon allegorical examples. There hasn’t been a home for sale on my street for decades. Hardly representative.
BTW, there are currently the largest number of vacant unsold homes on the market in HISTORY.
.
cinefoz: To put some numbers behind VJ’s claim, I am clipping from the post on Lawrence Lindsey over at Calculated Risk today:
There are 129 million housing units in the United States, comprising owner-occupied, rented, and vacant units. Of these, 18.5 million are empty.
That’s close enough to 1 in 7 for me. That strikes me as a surprisngly high number of empty houses/rental units, but I’ve certainly seen plenty of for sale/rent signs hoere in South Florida.
cinefoz,
That was a really dumb way for the writer to say that:
If the house was once occupied…
AND
The house is no longer occupied…
AND
The house is now for sale…
THEN
There is a 1 in 7 chance that it’s a foreclosure property.
That seems pretty reasonable to me.
It exludes all houses that aren’t for sale, as well as any occupied house that is for sale, and any new construction (never occupied) houses.
It does point out an interesting thing:
6 out of 7 of the above houses are not foreclosures. Some of these are probably owner walkaways, which are not technically foreclosures. Others represent people who are trying to sell houses they no longer live in or perhaps never lived in but had rented out. Eventually some of these probably will be foreclosures.
Interesting.
-btc
NAR’s response; “What foreclosures?”