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Foreclosure Watch: How Many Houses for Sale?


In the Pacifica Tribune (6-24-09) a local real estate agent ran a full-page ad in which one column was headed "Real Estate and Loan News." She asserts, among other things, that: "Inventory is Low ... Currently there are 47 single family homes for sale in Pacifica down from over 100 this time last year. ... Today there are only 4 bank owned properties on the market." But according to RealtyTrac, a Southern California company that tracks foreclosures, there were 60 bank-owned properties (REO) as of June 21, 2009, in Pacifica’s 94044 zip code. Since then, the number has declined to 56, indicating a huge "shadow inventory" of REOs in Pacifica if banks are not putting them on the market.

How Big Is the Problem?

The chart below is a record of Pre-Foreclosure Notices over the past two years published in the Pacifica Tribune. The data are for the northern San Mateo County cities of Pacifica, San Bruno, Daly City, South San Francisco, and Brisbane. The data are incomplete because these notices may be published in other newspapers of record such as the San Mateo County Times.


(click chart to enlarge)

Estimates are that between 40 percent and 80 percent of these houses in pre-foreclosure progress to the auction stage of the foreclosure process in San Mateo County. RealtyTrac’s data provide a more complete picture of the problem of homeowners in trouble. Pacifica has seen a large increase in pre-foreclosure notices and foreclosure auctions since the last quarter of 2008. The figures are from the latter part of each month cited:


              Pre-Foreclosure    Auction 

Oct. 08             81                     15
Nov. 08            62                     21
Dec. 08            59                      24
Jan. 09             63                      22
Feb. 09             67                      17
Mar, 09             91                      22
Apr. 09            106                    34
May 09            108                    52
Jun. 09             125                    57

The problem is that unsold inventory appears to be rising rather than falling. An increase in the foreclosure rate could indicate further downward pressure on house prices.


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Realtors do not sell properties. Their owners sell them. Realtors *represent* sellers.

Even if a seller--individual or bank--is represented by a realtor, they still have a lot of duties to perform. They must still evaluate offers made by buyers, engage in counteroffers, and in order to close the sale, must complete a lot of paperwork.

If a bank has tens of thousands of properties nationwide currently in foreclosure, the evaluation of offers and completion of the paperwork requires a lot of manpower. Due to the current economic situation, many banks lack that manpower, and it may require the approval of several people at the bank to approve an offer.

So I'm told that often it takes forever to get the bank to respond to an offer, they usually have an inflated idea of what it's worth (like any seller who's underwater) and it frequently takes several counteroffers to reach a price. All this for a house that's probably being sold as-is in poor condition. As a result, many REOs sit on the market for a very long time.

If I'm wrong about any of this, I apologize. You're the real estate expert!

The theory that "most all are not experiencing the problem therefore there ain't one" is pretty interesting.
I have lived in this town for 50 + years and have never seen this problem before. I considered a piece for Riptide called "Real Estate: The Anti-Tour," which would have involved three or four photos with captions of abandoned properties in our north end of town.
Pretty easy to do, and illustrative, but I don't have time. I ran across another abandoned house in Linda Mar today, for sale by a CPA!
Think there's no problem?
Pull your head out of the sand.

Matt- The banks do not sell their own properties. One bank will give all the properties in a hundred mile radius to one agent. They generally price the properties lower than the market and get multiple offers and they do not stay on the market long at all. This is from local experience. Ask a REALTOR!

Posted by: Sue Vaterlaus | July 03, 2009 at 12:52 PM

This is correct as you will note driving by the foreclosed real estate when it comes back up on the market most of the time it is "out of Pacifica" agents who market the properties for the banks..

Only the very small banks sell the properties direct with no Realtor

Matt- The banks do not sell their own properties. One bank will give all the properties in a hundred mile radius to one agent. They generally price the properties lower than the market and get multiple offers and they do not stay on the market long at all. This is from local experience. Ask a REALTOR!


I believe there are about 14,000 homes in Pacifica. With 60 homes foreclosed, that would be a percentage of less than one half of one percent. I don't know what the national average is, but it seems less than alarming.

Of course, one foreclosure is a tragedy to any family. However, if the same measure is taken for the number of homes in this county, I think one would assume that San Mateo County is faring much better than most.

The County Assessor has lowered some property taxes when petitioned by homeowners whose mortgages are "under water." If you of know anyone in that situation, that may be of some small assistance.

Unfortunately, the recent law that involved foreclosure/loan modifications that passed Congress had the provision stripped out of it that would have allowed bankruptcy judges to modify terms of loans.
These judges would have been the logical candidates to bring some reason back into a process that had come to resemble the wild, wild, west.
The banksters made sure that provision died.

I also hear that many foreclosed properties sit on the market for a long time because banks either don't have the staff to manage the selling process, don't price the properties correctly for local markets, don't respond to buyer offers, and so forth.

And as long as those foreclosed properties sit there, people who aren't being foreclosed won't sell unless they absolutely have to, because they don't want to compete with foreclosures and prices are low. So I think those things also explain low inventory better than the idea that the real estate market is about to take off again.

The brief moment of hope that housing had hit a bottom and that both the rate of home sales and prices would improve is slipping away.

I think Foreclosure rates rise with unemployment levels as many homeowners are unable to pay back the loans which they thought they would repay through their pay checks every month. The fact is that the anxious borrowers are still unsure of their repayment capabilities.

Recently read an article on a similar premise.


Delinquencies Double on Least-Risky Loans, U.S. Says (Update2)
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By Margaret Chadbourn

June 30 (Bloomberg) -- Delinquency rates on the least-risky mortgages more than doubled in the first quarter from a year earlier as U.S. efforts to help homeowners failed to keep pace with job losses that pushed more borrowers toward foreclosure.

Prime mortgages 60 days or more past due climbed to 2.9 percent of such loans through March 31 from 1.1 percent at the same point in 2008, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said today in a report. First-time foreclosure filings on the loans rose 22 percent from the fourth quarter, the report said.

“I’m very concerned about the rise in delinquent mortgages and foreclosure actions,” Comptroller of the Currency John Dugan said in a statement with the report. President Barack Obama’s plan to create “sustainable, payment-reducing modifications is a positive step that should show significant benefits in the coming months,” Dugan said.

Obama’s program, unveiled Feb. 18, aims to help as many as 4 million homeowners by modifying loans and calls for Fannie Mae and Freddie Mac to refinance mortgages for as many as 5 million borrowers who owe more than their houses are worth. Foreclosure filings surpassed 300,000 for a third straight month in May, according to RealtyTrac Inc., and the U.S. economy has shed about 6 million jobs since the recession began in 2007.

“Job losses have mounted and even those with good credit that were able to get a prime mortgage are having a harder time making monthly payments with a loss of income,” said Celia Chen, an economist at Moody’s Economy.com in West Chester, Pennsylvania.

Serious Delinquencies

Serious delinquencies on prime loans, which account for two-thirds of all U.S. mortgages, rose to 661,914 in the first quarter from 250,986 a year earlier, according to the report. Overall, mortgages 60 days or more past due rose 88 percent from last year, the report said.

Mortgages modified to help struggling borrowers stay in their homes fail within nine months more than half the time, the report said. About 53 percent of mortgages modified in the first quarter of 2008 were 30 or more days delinquent after six months; 63 percent were in default after a year.

As lines of credit deteriorate, home prices are moderating. The S&P/Case-Shiller home-price index for 20 major U.S. metropolitan areas fell 18 percent in April from a year earlier, the smallest decline in six months.

“When home prices are down, many homeowners have negative equity, not just subprime borrowers have trouble but prime borrowers do as well, and foreclosures are more likely,” Chen said.

Missed Payments Added

About two-thirds of mortgage modifications by servicers used two or more techniques to make loan payments more sustainable, the agencies said in the report. About 70 percent of the workouts added missed payments and penalties to the outstanding balance. About 63 percent involved interest-rate reductions and about 25 percent extended the life of the loan.

Only 13 percent of modifications froze interest rates, and about 2 percent included a principal writedown.

“Serious delinquencies are a leading indicator of increased foreclosure actions in the future,” the report said.

Fannie Mae and Freddie Mac, the government-controlled mortgage-finance companies, lagged behind private industry in the quarter, the report shows, as the U.S. spent February and March retooling underutilized anti-foreclosure programs.

About 14 percent of loans modified were initiated by Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac, the data shows. Private investors accounted for 55 percent, while loans held by national banks made up 31 percent, according to the data, which includes residential mortgages serviced by national banks and federally regulated thrifts.

The data shows 5.9 percent of the 21.8 million Fannie Mae and Freddie Mac loans serviced by national banks or thrifts were at least days 30 days late, in foreclosure or subject to bankruptcy, compared with 3.2 percent a year earlier.

The report covers the performance of 34 million loans totaling $6 trillion, the agencies said.

To contact the reporter on this story: Margaret Chadbourn in Washington at mchadbourn@bloomberg.net.

Last Updated: June 30, 2009 13:33 EDT

With employment being a lagging indicator for the economy's recovery and residential real estate being dependent upon confidence in keeping one's job, what exactly makes this bottom out in 2012? What is magic about that year?

Posted by: Cyd Crampton | June 30, 2009 at 01:39 PM

Well, go back and look at how long the average recession lasts. Normally a boom market lasts about 4 years and the bust market anywhere from 2-4 years. This is not a normal recession and market conditions are nowhere close to hitting bottom

Thanks to all for the comments.

Add in the people who want to sell their house but can't come to grips with the reality of reduced prices, those who are losing their jobs, those who took out "creative" loans, such as Alt-A (known as "liar loans" because one didn't have to document income to obtain the loan), and you have a picture of rising inventory.

I believe Sue when she says inventory is low because that's what's visible. It's the other factors that really tell the story.

The public needs to be aware that there is the visible, and the iceberg beneath the surface.

With employment being a lagging indicator for the economy's recovery and residential real estate being dependent upon confidence in keeping one's job, what exactly makes this bottom out in 2012? What is magic about that year?

The nation is finding it difficult to recover from on of the deepest downturns of the housing market so far. Despite federal efforts to bail out the situation, the market is not showing very bright signs of easing.

I think,with high job losses, house owners are unable to pay back the loans which they thought they would repay through their fat pay checks every month. Foreclosure rates rise with unemployment levels as many homeowners are also affected if they are not able to earn money for long periods of time. People who want to buy new homes are also refraining from the risk as they are unsure of their employment in the coming months.

Read an interesting article on this subject.

Looking at the Notice Of Defaults, which is the start of the foreclosure process going up every month, is a sign this mortgage mess is nowhere close to being over. Some properties have lost 50% of the value from the peak market.

Normally, San Mateo County and the Peninsula are pretty shielded from huge numbers of foreclosures, but this market was much different. With Stated income loans the rage, people bought way too much house, much more house than they could afford.

Now layoffs and job cuts are piling on to the foreclosure numbers.

My own prediction is 2012 before we get the market to come off the bottom

There are 14,218 housing units in Pacifica. That is in the fast facts at the City of Pacifica, which likely includes apartments. I was thinking that it was more like 10,000. Not saying anything about loans or otherwise.

Can anyone quote how many single family homes in Pacifica are NOT in, nearing, or in full foreclosure? What is the actual percentage of homes that these figures represent? Would just like some perspective.

Posted by: Cyd Crampton | June 29, 2009 at 12:00 PM

You would have to call the assessors department in Redwood City and ask them. Then you would have to have a form package run to find out how many homes have loans. Never did one for Pacifica. Then you can break it down to homes with no loans and homes with fixed rate loans and adjustables.

It takes a lot of work. I do them quarterly in another market and it's a pretty detailed report

Can anyone quote how many single family homes in Pacifica are NOT in, nearing, or full foreclosure? What is the actual percentage of homes that these figures represent? Would just like some perspective.

To make an understatement of the year, RealtyTrac is the least reliable, most out-of-date source of information you can find.

Take a look at some of these:

I ran a super quick stat report all year to year -- May 08 to May 09: Number of houses for sale down 38.5%. Number of sold up 33.3%. Months of inventory based on closed sales is 2.8 as compared to 5.4. Average sold price 584 as compared to 651.

I'm not saying that Pacifica hasn't been hit; it certainly has. It's just that RealtyTrac is not a reliable source of information to figure out how much it's been impacted.

Depending on who you believe..the default ratio of loans is somewhere between 4 and 20 percent..

I was at one of the biggest loan servicer meetings a couple weeks ago they said they have figured it is going to peak at about 18%..

Prices keep going down and I believe we are not even half way thru this cycle

Many pre-foreclosures never go anywhere as the people can recover then, short sell the property, or they might do a loan modification. California has placed a 3 month moratorium on foreclosures, but that might only include homes where no notice of default has been filled. The ad was correct that in all the cities locally the inventory is down. We have a larger number of pending sales than properties currently for sale. I do agree that the banks may be holding properties that have already been foreclosed on and we have no clue when they will hit the market. We have other issues too in the fact that the foreclosure agents (the bank assigns all foreclosures to one agent to cover about 100 miles of properties) do not have a clue what the neighborhoods are about and often underprice the listings. We will have to wait and see what happens.

The great news is that according to this chart there are no Pre-Foreclosure Notices at all in July.

It's like unemployment numbers. There are lots of folks off the radar that are not counted anymore meaning unemployment like unsold bank owned properties are much higher than commonly understood.

Lionel, please take a breather, I can't take anymore! Have pity.

Thanks to Arnold and my own optimistic refinancing plans, my home may soon become a statistic, too.

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