“Right now there are more houses in some stage of foreclosure than there are current listings of properties for sale.” 

I do not know if you really need to say much after this.

WTF is with all the mirrors in this place?  Like a freaking carnival funhouse in there.

Wow, excellent maps IR. I wish someone would be industrious enough to do that for Northern Virginia…

That condo is a nut-house. Don’t ever try to cook a curry in that kitchen, the entire house will smell like it. How much vertical space do people really need? I think this clearly breaks the DC rule of height of a building to width of the street and demonstrates why that’s not such a terrible concept.

Per the NY Fed regarding Alt-A mortgages in California~

There are approximately 721,291 Alt-A mortgages in California (as of last year).

The average balance is $420,291
The average FICO score is 709
36% of them are interest only
31% of them are negative amortization
Began 2007 ~ 24.1%
Began 2006 ~ 38.3%
Began 2005 ~ 26.3%
Began 2004 ~ 11.3%
Low or No Doc ~ 83.2% (47% for subprime)

These mortgages were the turbo chargers, that provided the boost at the perfect time ... just as the OC real estate market had completed an up-cycyle.

Per dataquick, The OC Median Price~

$385,000 = Y/E 2002
$467,000 = Y/E 2003
$551,000 = Y/E 2004
$621,000 = Y/E 2005
$642,000 = Y/E 2006

The OC’s business model was selling subprime mortgages to the reminder of the country, but our personal business was using Alt-A mortgages to fluff up our WTF prices.

Once connect the dots for The OC real estate market, the word that comes to mind ... calamity.

IR, Great analysis as always. 

You may already have seen this mea culpa about mortgage debt written by a NY Times financial journalist (http://www.nytimes.com/2009/05/17/magazine/17foreclosure-t.html?_r=2&pagewanted=1). 

The relevance to your foreclosure analysis is that the author claims he hasn’t paid his mortgage in 8 months but he has yet to hear from anyone because the mortgage servicer is overwhelmed by the backlog.  Also, several months ago a telephone agent from the bank told the author there were 500 distressed mortgages per analyst. 

IR, you are correct to emphasize the time it takes for foreclosures to work through the system, but even you may be understating it.

I have a post coming out later this week that has a borrower who hasn’t made a payment since late 2006 who is still in her home. With all the delays and moratoria, I am starting to believe we will not see a bottom until 2013 or 2014.

Fitch: California, Arizona, Florida Home Price Declines in Line with U.S. RMBS Forecast
NEW YORK—(BUSINESS WIRE)—

Home prices in hard hit states like California, Arizona and Florida still have a considerable way to fall before stabilizing in late 2010, according to the latest U.S. home price forecast from Fitch Ratings.

Fitch expects that California will lead the way with an additional 36% decline in home prices from current levels over the next 12 to 18 months. Florida and Arizona are forecast to see declines of over 20% from today’s levels in the same period. Not surprisingly, these states saw the largest run up in prices, with them more than doubling in the 2002-2006 period. To date, home prices in these three states have already fallen by 40% on average.

California, Arizona and Florida account for approximately 50% of the overall non-agency mortgage origination volume by dollar over the past four years. New York has averaged approximately five percent of the dollar volume with New Jersey, Texas and Illinois accounting for three to five percent on average.

Fitch believes that most of the home price correction will occur in the next eighteen months, with prices exhibiting more stability beginning in late 2010.

Fitch’s forecast analysis assumes a 1.5% inflation rate for 2009 and 2010 and 3% for the following three years. Nationally, Fitch expects home prices to fall a further 12.5% on average.

Fitch’s forecast is primarily based on its expectation that home prices will return closer to the inflation-adjusted long-term historical mean, which has been the pattern of prior home price cycles. However, given the volatile economic conditions, Fitch will continue to actively review its forecasts.

Would be nice if this actually happened, but it does not seem very realistic.  They are not factoring in an overshoot from all the force multipliers that are putting downward pressure on the market.

The model that they are using seems to be ignoring things that I would think are relevant like:

1.) Unemployment
2.) ARM recasts
3.) Declining incomes
4.) Oversupply (Shadow ivnentory)
5.) Artificially low interest rates
6.) Credit availability

It seems like they are still using to old hack model of the magical inflation average and failing to take into account reality.

I say that there is no way that stability is reached by 2010.  No way in hell - especially with the government meddling and making things worse.

I say we are lucky if things even look hopeful by the end of 2012.

Looking more and more likely, unfortunately. 

That is pretty outrageous.  I have been paying rent all this time like a total sucker. 

Perhaps a public shaming is in order.

You people should make up signs that say:

“My Loss Is Your Gain”
“No Free Lunch For Deadbeats”
“I pay rent - Why don’t you?”
“Part Of The Problem”

and march up and down this person’s street and draw some attention to it.  I’m sure most of the neighbors don’t know.

Downpayment assistance programs have proven default rates 4 times as large as programs where buyers put money down. Despite this, the NAR keeps lobbying for them:

FHA Preps Tax Credit for Down Payment Use

Home buyers qualifying for Federal Housing Administration-insured mortgages may soon use the new first-time home buyer $8,000 tax credit as a down payment, US Department of Housing and Urban Development secretary Shaun Donovan said today.

The process of applying the tax credit toward down payment, called ‘monetization’ in the industry, allows for FHA-qualified borrowers to use the tax credit to obtain a government-insured mortgage.

Donovan’s announcement came at a National Association of Realtors legislative summit this morning, although HUD’s details on the initiative aren’t scheduled for official release until next week. The initiative will allow FHA-approved lenders to monetize the tax credit through short-term bridge loans, letting borrowers access the funds at the closing table.

“We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment,” Donovan said, according to NAR.

The tax credit arrived as part of the American Recovery and Reinvestment Act of 2009 for qualifying taxpayers that buy homes in 2009. The law states that qualifying home buyers may claim up to $8,000 — or $4,000 for married individuals filing separately — on either their 2008 or 2009 tax returns. Unlike the previous law — which required recipients of the tax credit to repay the funds over a number of years without interest — the new home buyer credit effective with the passage of the act does not have to be repaid.

IR:

Excellent take on the Irvine market for the rest of the year. Thanks.

From my research, I’ve seen that it basically takes 12 months to get from NOD to REO.
OC NODs vs REOs:
http://spreadsheets.google.com/pub?key=pGy0BQU1PZ9DkdsiaqdkuEQ&gid=3
If you shift the REO numbers backwards 12 months, you’ll see they track very closely (until the SBxxxx law was passed)
http://spreadsheets.google.com/pub?key=pGy0BQU1PZ9DkdsiaqdkuEQ&gid=5

I read 2 things from this chart:
1. Selling season 2010 will be slaughter season (unless theres a speed-up of the typical 12months - which is plausible since the REO guys havent had ‘work’ during the moratorium).
2. I honestly think we’ve seen how many NODs a bank can pump out in a given month. Theres a big March spike, but I believe those were NODs that were sealed and had postage on them, just needed to go out the door. I think the plateau is that ~2500/mo range.

The big question is how much of a backlog does the bank have? If they can only pump out 2500/mo, how many are really defaulting?

When DQ releases April data, I’ll add it.

hrmm. that was meant to be a post to the main thread, but I like Lee so I’m cool with it here.

Also, links for the lazy:
[url=“http://spreadsheets.google.com/pub?key=pGy0BQU1PZ9DkdsiaqdkuEQ&gid=5”>http://spreadsheets.google.com/pub?key=pGy0BQU1PZ9DkdsiaqdkuEQ&gid=3</a>
and
<a ]http://spreadsheets.google.com/pub?key=pGy0BQU1PZ9DkdsiaqdkuEQ&gid=5[/url]

grrr. Lets try a different kind of link. IR, did your posting code change? Or did I screw up my links?

http://spreadsheets.google.com/pub?key=pGy0BQU1PZ9DkdsiaqdkuEQ&gid=3

http://spreadsheets.google.com/pub?key=pGy0BQU1PZ9DkdsiaqdkuEQ&gid=5

If you’ve ever wondered how a responsible person with excellent credit is caught up in the mortgage mess, here’s a link to an article by a NY Times economics reporter that details the process remarkably:
http://www.nytimes.com/2009/05/17/magazine/17foreclosure-t.html?_r=1&ref=patrick.net

Don’t get too excited over those maps.  I don’t know about all of Irvine, but I can tell you that probably at least 1/3 of the P’s, A’s and even B’s on the FR maps I look at are properties that have already sold, or are in escrow.  The real future inventory could be much smaller than what the maps indicate.

That is just ugly!

I wouldn’t call this guy a “responsible person”.  Not even close.

I agree - not exactly a poster child for “reponsibility.”  Way too many risks taken across the board.  Like vacations on credit?  WTF?  He’s an excellent writer though!  I hope the best for him and people in those kinds of situations, especially their kids.  I’m not suggesting that those of us who are responsible with our money keep accepting tax hikes and massive gov’t debt to make those people whole, but compassion is warranted.

Excellent credit has no bearing on responsibility.

My credit rating should be stellar as I do not owe a nickle to anybody, pay off credit card balance in full every month, and never come close to spending up to my limit, and have an otherwise flawless history.

However, when I check my credit profile - I am deemed just average.  Not bad, not great.  Why?  Because I don’t like paying interest to banks and they punish people like who don’t play along.

That’s what you get for not living in debt.  Excellent credit is nothing more than a measure for how frequently the bank feels they can milk you.  I think they should call it your MOO! rating.

Same here David.  I think ours is in the 760 range- - but while we use the heck out of the AmEx and VISA (they pay us cash rewards, like maybe 1500/year total), we have no debt (renting house, cars bought with cash) and have not ever carried a balance on a CC in 17 years of marriage.  No annual fees and they pay us cash back.  We are not really the credit card company’s “ideal” customer.  So there’s no way to increase your score w/o borrowing and paying it back (while incurring interest charges).  Strange system to call us less “credit worthy.”

I seriously hate listening/reading to bozos like this guy cry and moan over how hard their lives have become.  I am sick and tired of it.  Listen to the guy go off about “being in love”, etc makes me wonder that he isn’t completely playing with a full deck, but whatever.

The lenders would have let me buy a nice house too if I would just promise to make the payments.  I declined and opted to rent and enjoy a less lavish lifestyle and keep things affordable.

Screw this guy and his wife.  Let them go work at Kentucky Grilled Chicken and pay back some of the debt that these pigs accumulated at the expense of the community coffers.

Let’s just hope he learned a lesson.  I don’t want him borrowing any more money for a house for a long time, if there is a chance he makes us taxpayers eat it again.  But we can hope he finds a good rental within his means, can’t we?

Can you seriously believe this blatant shell game and the government getting its greedy little paws into the Subprime lending scheme?

I think that I have enough of Obama and am pretty certain of what we can expect for the next 3.5 years.  I have been trying to give him a fair chance, but he doesn’t do anything but kiss ass and put on shows for the masses to show up and worship celebrity style.

Ron Paul was the right man for the job.  He may not have infatuated the masses, but his first 100 days would have been a lot more effective in getting us back on the right track.

The URL code sometimes does not work. I always use:

a href=”“>title<a>

Put a “<” in front of that, and put the URL in quotes.

Yes, I have to agree with you on that one. Their lives are only “hard” because they became accustomed to an “easy” life of Ponzi Scheme borrowing. The hard life they are enduring is the “normal” life they would have had without the Ponzi Scheme.

sigh. this gets posted down here and not as a reply to where it should have been. ah well.

While I agree with you that many of these sites are out of date or wrong, the main point here is its all relative.

Lets say that 6mo ago the NOD numbers were half of what they are today. We saw a (lets say) 15% decline with those 6mo ago numbers. Whats doubling them going to do?

IR: I’m not sure I’m reading the Credit Suisse Graph correctly. Option ARM is a type of mortgage; Alt-A is a category of borrower. It looks like apples and oranges are being compared.
Or is each category simply represented as an absolute $ amount at a given point in time classified as either loan type or borrower type: e.g., in Aug. 08 was there $7BB borrowed by Alt-A borrowers and 29BB in opt-arm type loans?
Thanks for the clarification.

It’s nice that they lowered the price 100K, since there is probably an easy 100K of work that needs to be done.

NOTES: April’s NOD fell sharply from April…

HUH?

from the boston globe via patrick, HUD now says it ain’t gonna happen:

http://www.boston.com/realestate/news/blogs/renow/2009/05/not_so_soon.html?ref=patrick.net

Hopefully a new metric for credit worthiness will emerge from this mess that will be driven by the marketplace. 

If the government is involved, then the incentive will be for spending beyond one’s means - to the detriment of the responsible taxpayers.

In the interum, vote out the incumbants!

I agree on that. That bathroom is very dated. This complex is down Blue Lake S from me. Some overlook the lake but most of them are on some sort of waterway going throughout the complex. Not a good place to live with toddlers who could get out and they definately have mosquitos (mosquitoes??) over there with all that standing water.

The Credit Suisse graph has always had the problem of categories that are not mutually exclusive. I can only assume their internal controls in writing the report caught any double counting.

I believe they are lumping all Alt-A ARMs together to distinguish them from Prime ARMs. Both loan products will be similar, but the borrower class is different.

I would have liked to see them separate amortizing ARMs from interest-only ARMs. That distinction is much more important than separating by borrower class. The graph would have been much more informative if it had been separated into three categories: Option ARMs, interest-only ARMs and amortizing ARMs. The Option ARMs will have an 80% to 100% default rate. The interest-only ARMs will have a 50% to 80% default rate. And the amortizing ARMs will have low default rates as long as interest rates are low, then they will skyrocket.

There’s need and want.  Does everything in the bathroom work?  Does the toliet flush and the sink not leak?  Those are needs.  Making it “modern” or whatever is merely a want, IMHO-a cost and hassle that not everybody would want to pay for.

Wow, pretty irresponsible for a 48 year old. It sounds like his second wife didn’t help out much either. A couple of pretender spenders who just can’t understand where these $50K in credit card bills came from.

I’ve never had a panic attack over bills. Maybe because we’re thrifty, and put away $2000/month. Almost $1000 of that goes towards our annual property tax bill, but we’re responsible enough to save that up ourselves, without an escrow account. I can’t say I’ve ever been tempted to just go spend it all. Usually I get depressed after big-ticket purchases. All I can think about is the money that was saved up and spent, and not the goods that were procured. Most people get a high from spending like that, but I’m the opposite. How can people not see the connection between buying something and paying for it. It’s like they think the latter should be optional.

It’s a tax credit, but it’s a LOAN.  You have to pay it back over 15 years.  This is just another 80/20 piggyback loan scheme.  It’s not “cash to be used as a downpayment”.  WTF.

Major, I have been doing that these past few election cycles and nothing has changed.  I worked on Capitol Hill for years, back when I still thought that there were more honest people than dishonest in Washington.  I’ve aged, and that fantasy has been obliterated.  I’ll keep voting “no” but at some point I’d like something positive to vote FOR!

yea I think the one above I forgot a closing quote inside the href. ah well.

Interesting, I believe I’m in the same boat.

I haven’t carried a credit card balance for the past year, and I just paid off two vehicles which have been financed. Now I only have two student loans that I’m paying on, and I don’t plan on buying another vehicle for at least five years from now. How will this affect my credit? I don’t plan on buying a house for at least three years because I probably won’t have of a downpayment and emergency savings until then.

It’s funny how responsible behavior gets punished, yet the other guy who has $100K in debt and just pays the minimum on time supposedly has ‘excellent’ credit. What are the odds that will change any time soon?

True, but not everyone has to HELOC to update a bathroom or kitchen. We’ve been saving up and soon I will get to update my 1985 kitchen with new cabinets and countertops (which I really need and want). 
Nothing major like knocking out walls. Just a basic update to a small, old kitchen. Yeah me!

actually isn’t it now NOT a loan, since the new legislation? I know the 7500 was, but I thought they had gotten rid of the repayment in the 09 legislation.  You’ll notice its not actually helping to sell any houses

Excellent post.
I was really surprised to see that there are very few pre-foreclosures in the westpark regions where houses are still listed for 1-1.5million. (area between culver,main & san leandro or the ones near paseo westpark and warner) ..no ocean view or ‘lake’ view, yet people shell out so much to stay in irvine.

since you HAVE had installment loans in the past, even though you don’t have them now your credit should still be better than the people who have never had one.  I think “installment loan of longer than 2 years” is one of the things they rate against.

Saving and paying cash rather than use a HELOC? I don’t think that has happened in Irvine since the turn of the millennium…

I agree…. the forecast makes me think of a scientist locked in his lab coming to a conclusion about something just outside his window without ever walking around the block.

I didn’t sense him moaning and crying about how hard his life became.  To me, what he was doing was telling his story of how he got to be in a bad place.  Most of these houses that IR profiles every day probably have very similar stories behind them.  I think this article helps show us how a “normal” person can fall into a trap like this.

And not sure why “being in love” means that the guy isn’t playing with a full deck…??

It’s funny how responsible behavior gets punished, yet the other guy who has $100K in debt and just pays the minimum on time supposedly has ‘excellent’ credit. What are the odds that will change any time soon?

I guess the answer is that the lending industry isn’t really about being fair or about doing the right thing.  Instead, the lending industry is about making money.  The guy who pays the minimum on $100k is a great customer, because he will be paying interest for the rest of his life.  That’s what the bank wants.

There’s not much in it for a bank to lend somebody $1,000 each month on a credit card, only to have the balance paid off every month.  I suppose they earn a little bit as a fee from the retailers, but that’s probably insignificant.

Although, it may not be the absolutely most efficient way to leverage your money, it seems to me that saving your money and paying cash for things is the way to go.  I sure haven’t been able to do that very well in my life, but it’s something I’m striving for. 

I think it would lead to a much more secure lifestyle if I never made debt service payments.  If I never had to worry that if I bought a new car, I’d be upside down on it for many months or years, etc.  Dave Ramsey claims he has no FICO record at all because he hasn’t bought anything on credit in many years.  I’d like to join him.

The wave continues to roll through the high end areas like the beach: just as expected the number of foreclosures are leading the pace there. The next thing that will happen is the high end will see the worst price drops, because that is what happens in a real estate collapse. Forget about Phoenix sales picking up—that will not stop what has already been set into motion.

PS—I heard that 70% of notices of default end up as auctions.

The guy’s story doesn’t follow logic—he’s paying $4000/month to his ex-wife for alimony and child support, but how about his new wife who has custody of her own children? Isn’t she collecting support? The author says his new wife hadn’t worked in years, if so then how would she have survived after her divorce if she hadn’t married the author? Why did they buy a house before the new wife even had a job? This guy is no victim, he made some very irresponsible moves; moreover, he’s not telling the whole story.

Have great credit and have now considered buying… but I am amazed when I go to WFC or BOA and ask about a mortgage they write on a sheet of post its how much a mortgage will be??? Shouldn’t this be spelled out on a sheet? Am I seeing Vinny the loan shark where it’s hand written. What the the costs line by line? where does a newbie find out this info? Step by step what each fee is and what is it compared to FHA or whatever??

AZDavidPhx,
  Who cares if Ron Paul was the right man for the job? Face it, this is a two-party state & the corporates run the parties. Obama’s using the same treasury people Hillary Clinton would have used (grumble, grumble) but would you have preferred McCain’s choice, Phil Gramm & his friends? Vote for Ron Paul & you help elect McCain/Palin. Yeah, it sux but that’s the ugly reality of 2008.

  Personally I’m giving President Obama a year. After 01/21/2010, all those GW-era disasters still unsettled are his. I hope he’ll lead us out of this wilderness but then again that’s only hope, not trust. Meanwhile, I’m trying to keep me & mine out of debt and out of obviously risky investments. And the first bankster to tell me I cannot withdraw my money on deposit has an ugly surprise coming… (and all our money is at local credit unions)

This dumbass, w/over $4,000 a month in alimony and child-support payments, his stupidity compels. Although I worked full time for over 35 years, never in my career could I have afforded that.  (perhaps he should not have divorced at this time?) But this dumbass bought an overpriced house…
And his dumbass lenders let him do that…
And now we taxpayers get to bail his dumbass out…
Can we have his street address? heh heh heh…

Right on, observer.

I noticed the same thing too this Sunday as I read the Magazine- there is quite a bit that is left unresolved in this story. And then there was the declaration by the new wife that she would have not moved ‘out there’ if she knew he was like that- anxious about money. Yet she knew he was a writer of economics for the NYT, for goodness’ sakes!

Here’s something rich: I paid off my 27K student loans by the time I was 26 (I am 32) and kept one card that I use to purchase flights on and for emergencies only. That’s it- and i pay it off. I don’t find he points on cc worth having since I fly only twice year, and always to family.

I have a 690 score. Because I pay cash for everything upfront and I don’t have continuous rotating debt. Well, yay. I refuse to play this sort of game with my finances.

You need to read carefully. The drop was due to the race to file NODs in March. A new law, the California Foreclosure Prevention Act, changed the rules as of April 2009. It added 90 more days to the foreclosure process. The banks tried to get all the foreclosures in before April therefore the huge spike in March.

Don’t count on it changing any time soon.  Responsible people have assets that the government wants to confiscate.  Therefore, only pain and punishment will follow the honest, hard-working, responsible debt-payers.

The card companies call you a “deadbeat.”  You pay on time and don’t generate those fat fees.  Don’t take the name personally, but welcome to the club of credit card users that don’t pay interest, fees and use the CC money for about a month for free. 
Another CC deadbeat.

See:

NOD for a few years back and the big up tick back to the high numbers again.