The MLS inventory is growing. The pre-foreclosure inventory is growing. And shadow inventory is growing. Will our spring rally fizzle out?
Irvine Home Address … 24 ROSE TRELLIS Irvine, CA 92603
Resale Home Price …… $1,900,000
{book1}
Give me no restrictions on what I do or say
Don't speak of tomorrow when it's still today
Leave me to my selfish ways, I'm well enough alone
That is what I tell myself as I stumble home
Derelict across the street in the garbage bin
Looks like he's found something neat judging by his grin
Such a long long way to go, hope I get there soon
Men At Work — No Restrictions
With the restricted inventory condition engineered by the banks, our market is not going to clear any time soon. They may be successful at holding up prices to some degree, but it will take a very long time to work off the overhanging inventory of distressed properties. As this process drags on, more Ponzis will flame out, and the distressed inventory will continue to grow. The housing bust is not over.
Only 650 on the MLS
About 650 homes are for sale on the MLS, and there very few properties in the foreclosure process currently for sale. Many of the short sales are in pre-foreclosure, but most of those in the foreclosure pipeline have already given up. They are squatting and waiting. The number of properties tied up in the foreclosure process exceeds our steadily increasing MLS inventory.
Pre-Foreclosure and Auction inventory continues to rise
According to ForeclosureRadar.com, visible inventory is as follows:
342 Pre-Foreclosure (NOD has been filed)
484 Auction (NOT has been filed)
826 Total Pre-foreclosure and Auction Properties.
Is 826 a big number?
In the last 30 days, the postponements have far exceeded the number of sales. There were 36 properties sold back to the bank, and 9 properties that were sold to third parties. That is 45 properties sold in one month out of an inventory of 826. At that rate of sales, it will take 18 months to clear the inventory.
Foreclosure inventory isn't like MLS inventory that needs three to six months supply available to make a market. Foreclosure inventory should be near zero. The total months to clear foreclosure inventory is usually less than one. The fact that we have over 800 properties in this visible inventory is troubling.
The homebuilders like the Irvine Company are taking advantage of the restricted inventory to sell new homes. As someone whose livelihood depends on the homebuilding industry, I think its great that sales are doing so well. As a consumer, I find it irritating that the reason homebuilding is coming back is because the inventory that should be available on the MLS is tied up by lenders who are allowing everyone to squat. It's really bad in Las Vegas where more than 1,000 new homes were built in a city with 9,000 empty ones.
At least 2,700 in Irvine shadow inventory
Bear in mind that none of these numbers capture the shadow inventory of those who are not paying their mortgage but the banks have not begun the foreclosure process. The latest report is that 8.4% of Orange County mortgage holders are delinquent on their payments. There are about 75,000 homes in Irvine and about 45,000 mortgages. If only 6% of those are delinquent, that amounts to 2,700 homes. If Irvine matches the 8.4% rate of Orange County, then 3,780 homeowners are delinquent The ratio of three to four houses in shadow inventory for each house in pre-foreclosure is about the same as national figures.
At the rate of distressed inventory sales of 45 per month, it will take 60 months to work off this inventory — and that is if we stopped adding to it today.
Eighteen months for visible inventory and sixty months for shadow inventory doesn't sound as bad as it really is because more properties will become distressed as this inventory is worked off. Many more borrowers that currently are not delinquent simply can't afford their homes. Large numbers of Ponzi borrowers are continuing to build their Ponzi debts. Most are resorting to credit cards right now waiting for the HELOC money to come back. It isn't going to. The long term ramifications of shutting down the home ATM is going to be more distressed properties and foreclosures as the Ponzis implode.
In the interim, we sit and wait.
Washington Mutual's Garbage
Below is a sample of one defunct lender's toxic waste. The first two properties account for over $10,000,000 in bad loans. Do you see why they are in no hurry to foreclose?
89 CANYON CRK | 5/26/2010 | $ 5,200,000 | WASHINGTON MUTUAL BK FA |
41 GOLDEN EAGLE | 6/7/2010 | $ 4,860,000 | WASHINGTON MUTUAL BK FA |
27 STARVIEW | 7/7/2010 | $ 2,240,000 | WASHINGTON MUTUAL BK FA |
8144 SCHOLARSHIP | 6/2/2010 | $ 1,674,282 | WASHINGTON MUTUAL BK FA |
11 GAVIOTA | 5/27/2010 | $ 1,260,000 | WASHINGTON MUTUAL BK FA |
3131 MICHELSON DR 1702 | 6/3/2010 | $ 1,226,600 | WASHINGTON MUTUAL BK FA |
3141 MICHELSON DR 1402 | 5/27/2010 | $ 1,000,000 | WASHINGTON MUTUAL BK FA |
28 CRIMSON ROSE | 5/27/2010 | $ 1,000,000 | WASHINGTON MUTUAL BK FA |
10 FIGARO | 6/2/2010 | $ 880,000 | WASHINGTON MUTUAL BK FA |
55 MIDNIGHT SKY | 6/21/2010 | $ 867,000 | WASHINGTON MUTUAL BK FA |
78 DOVECREST | 5/28/2010 | $ 815,000 | WASHINGTON MUTUAL BK FA |
61 DOVECREEK | 6/28/2010 | $ 760,000 | WASHINGTON MUTUAL BK FA |
26 DINUBA | 6/10/2010 | $ 744,000 | WASHINGTON MUTUAL BK FA |
89 LAMPLIGHTER | 7/7/2010 | $ 737,112 | WASHINGTON MUTUAL BK FA |
37 LAKEVIEW 54 | 5/21/2010 | $ 682,500 | WASHINGTON MUTUAL BK FA |
6 CEDARSPRING | 7/2/2010 | $ 650,000 | WASHINGTON MUTUAL BK FA |
16 ARBORSIDE | 5/25/2010 | $ 643,700 | WASHINGTON MUTUAL BK FA |
2251 WATERMARKE PL | 5/26/2010 | $ 639,000 | WASHINGTON MUTUAL BK FA |
4911 KAREN ANN LN | 6/2/2010 | $ 638,250 | WASHINGTON MUTUAL BK FA |
196 WILD LILAC | 6/14/2010 | $ 608,000 | WASHINGTON MUTUAL BK FA |
4082 GERMAINDER WAY | 6/18/2010 | $ 594,000 | WASHINGTON MUTUAL BK FA |
14 SHENANDOAH | 6/3/2010 | $ 560,000 | WASHINGTON MUTUAL BK FA |
4056 WILLIWAW DR | 6/3/2010 | $ 550,000 | WASHINGTON MUTUAL BK FA |
17 MONTE CARLO | 5/26/2010 | $ 548,000 | WASHINGTON MUTUAL BK FA |
62 FRINGE TREE | 6/17/2010 | $ 536,750 | WASHINGTON MUTUAL BK FA |
35 WONDERLAND | 5/26/2010 | $ 534,000 | WASHINGTON MUTUAL BK FA |
4092 ESCUDERO DR | 5/28/2010 | $ 487,500 | WASHINGTON MUTUAL BK FA |
14 BLUEBELL | 6/10/2010 | $ 486,500 | WASHINGTON MUTUAL BK FA |
5 FASANO | 6/7/2010 | $ 420,000 | WASHINGTON MUTUAL BK FA |
4391 BERMUDA CIR | 5/27/2010 | $ 417,000 | WASHINGTON MUTUAL BK FA |
42 GILLMAN ST | 6/7/2010 | $ 416,500 | WASHINGTON MUTUAL BK FA |
14601 LOFTY ST | 5/24/2010 | $ 398,000 | WASHINGTON MUTUAL BK FA |
212 GREENMOOR 94 | 6/14/2010 | $ 397,500 | WASHINGTON MUTUAL BK FA |
396 MONROE 190 | 5/24/2010 | $ 390,000 | WASHINGTON MUTUAL BK FA |
132 OVAL RD 2 | 6/11/2010 | $ 384,000 | WASHINGTON MUTUAL BK FA |
17 LAKEPINES | 5/24/2010 | $ 365,600 | WASHINGTON MUTUAL BK FA |
437 RIDGEWAY | 5/24/2010 | $ 315,000 | WASHINGTON MUTUAL BK FA |
10 LAKEPINES | 5/20/2010 | $ 286,780 | WASHINGTON MUTUAL BK FA |
87 ROCKWOOD 47 | 6/29/2010 | $ 272,000 | WASHINGTON MUTUAL BK FA |
4 MAGELLAN AISLE | 5/25/2010 | $ 260,000 | WASHINGTON MUTUAL BK FA |
147 STREAMWOOD | 6/21/2010 | $ 200,240 | WASHINGTON MUTUAL BK FA |
406 ORANGE BLOSSOM 121 | 6/10/2010 | $ 182,500 | WASHINGTON MUTUAL BK FA |
If any of you thought Irvine was immune, think again. All the households in the list above are squatters. Are any of your neighbors in there?
Prime mortgages going bust at an alarming rate
WASHINGTON — Aftershocks from the nation's financial crisis continue rumbling through the housing sector as fixed-rate mortgages held by the safest borrowers accounted for nearly 37 percent of new foreclosures during the first three months of this year, the Mortgage Bankers Association reported Wednesday.
Additionally, more than one in 10 homeowners were behind on their mortgage payments in the first quarter – a record, the association said. That's up from 9.47 percent in the last three months of 2009.
Prime loans, those made to the safest borrowers with the highest credit scores, account for almost 66 percent of outstanding U.S. mortgages, so their rising foreclosure numbers are troubling.
"People with higher scores are defaulting at rates we have not seen in the past," said Jay Brinkmann, the chief economist for the trade group.
I always get a kick out of industry insiders that act surprised. We have all known this problem was going to wipe out the alt-a and prime borrowers. It is only a matter of time.
If you have been paying attention to the news on delinquencies, for the last 3 years, this number has gotten worse month after month, and it shows no signs of peaking. Yet while the delinquency rates continues to climb, we get reports about declining default notices or declining foreclosure rates. Those rates become rather meaningless as long as the delinquency rate keeps climbing. The differential just adds to shadow inventory.
It is becoming obvious that shadow inventory is the only answer lenders have to the problem. They screw around with foreclosure statistics, and they allow a great deal of squatting. The result of their amend-pretend-extend is a restricted inventory condition supporting current pricing. I believe this is a cartel arrangement doomed to collapse. We will see.
The slide into foreclosure of the strongest borrowers is partly a function of the nation's unemployment rate, which is now 9.9 percent. The Great Recession has mowed down white-collar and blue-collar workers alike.
I would like to caution people against making a strong correlation between unemployment and delinquency. Unemployment is certainly making matters worse, but most of these people would have defaulted anyway in time. Unemployment simply accelerates the process.
The danger in this correlation is the false belief that an improvement in employment will bring about an improvement in the delinquency rate. It won't. Most delinquent borrowers couldn't afford their mortgages when they were fully employed. If they go back to full employment, they still won't be able to afford the mortgage.
In the first quarter, almost 21 percent of foreclosure starts were for adjustable-rate mortgages held by credit-worthy borrowers. Fixed and adjustable-rate prime mortgages combined accounted for more than 57 percent of all new foreclosures.
The MBA's data also showed that more than 6 percent of fixed-rated prime mortgages were delinquent from January to March and more than 13 percent of all homeowners with adjustable-rate prime mortgages were behind on payments.
California – the most populous state, which accounts for more than 13 percent of all U.S. mortgages – seems to have turned a corner in housing problems. It held 21 percent of all foreclosure starts during the first quarter of 2009 but only 14.5 percent in the first quarter of 2010.
Before we celebrate the improvement, consider what this statistic measures: the delinquency market share. California delinquencies are still rising, but other states are rising even faster. Our loss of delinquency market share isn't because borrowers here stopped going delinquent.
…One potentially troubling trend emerged: foreclosure starts rising in states that aren't commonly viewed as housing-bubble states. Washington state posted the largest increase in foreclosure starts overall in 2010's first quarter versus a year earlier, followed by Maryland, Oregon and Georgia. Washington state also posted the largest rise in foreclosure starts that involved prime and subprime adjustable-rate mortgages.
In another troubling trend, 42 states and the District of Colombia saw increased foreclosure starts for homes that were carrying FHA loans, which are considered among the safest. Only nine states, including Alaska and Idaho, saw foreclosure starts for FHA loans fall.
The rise in prime-mortgage foreclosures is important in the context of the sweeping revamp of financial regulation that's moving through Congress. Big financial institutions are trying to defeat a provision that would require them to retain 5 percent of the mortgages that they underwrite or sell into a secondary market to be packaged into mortgage bonds. They argue that they shouldn't have to do this for prime fixed-rate loans, but the latest data show that these loans aren't immune to delinquency and foreclosure.
Why would lenders resist a regulation to keep 5% of their mortgages in their portfolio unless they wanted to underwrite bad loans? The whole point of having a secondary market was to allow free movement of capital, not to allow banks to become origination machines with no responsibility, which seems to be what they want.
The data also suggest that the Obama administration's efforts to reverse the rate of delinquencies and foreclosures haven't been effective. The Treasury Department reported Monday that lenders or loan servicers had permanently modified only 68,000 mortgages in April, while more than 277,000 modification offers were canceled and presumed to be back on foreclosure tracks.
"It is jolting to see the persistence of the foreclosure epidemic," Michael Calhoun, the president of the Durham, N.C.-based Center for Responsible Lending, said in a statement.
It's only jolting to those who didn't expect this to go on so long. I have consistently maintained that loan modification programs have no chance of success other than to give borrowers false hope and get them to make a few more payments. The amend-pretend-extend policy has caused this crisis to drag on much longer than it should have.
HELOCs are a girl's best friend
Sometimes, I really wish I would have lied and levered myself into a $1,000,000+ home. The banks are not foreclosing on anyone over the conforming limit. Of the 36 properties that went back to the bank in Irvine over the last 30 days, only one of them was over $800,000 (it was a penthouse in the North Korea Towers). Of the nine properties that were sold to third parties, the most expensive was $700,000. The banks know there is no market outside of the GSEs and the FHA, so everyone who has defaulted on a jumbo loan is being allowed to squat.
The owner of today's featured property is like many other high-end Ponzis. She has taken enough money out of the walls to support an opulent lifestyle, and now she is squatting.
- This property was purchased on 12/16/2004 for $1,293,000. The owner used a $969,650 first mortgage and a $323,350 down payment.
- On 1/19/2005 she got a $129,000 HELOC.
- On 7/19/2005 she refinanced with a $1,200,000 first mortgage.
- On 9/28/2005 she opened a $195,000 HELOC.
- On 5/1/2006 she obtained a $282,800 stand-alone second.
- Then on 7/14/2006 she refinanced with a $1,499,900 Option ARM with a 1.85% teaser rate and a $189,000 HELOC.
- Total property debt is $1,688,900.
- Total mortgage equity withdrawal is $719,250.
- Total squatting is at least 15 months.
Foreclosure Record
Recording Date: 08/31/2009
Document Type: Notice of Sale (aka Notice of Trustee's Sale)
Click here to get Foreclosure Report.
Foreclosure Record
Recording Date: 05/21/2009
Document Type: Notice of Default
You have to admire the thinking of these Ponzis. After extracting nearly three-quarters of a million dollars and squatting for more than a year, she lists the house at a WTF asking price hoping someone will step up and pay off her debts.
Any takers?
Irvine Home Address … 24 ROSE TRELLIS Irvine, CA 92603
Resale Home Price … $1,900,000
Home Purchase Price … $1,293,000
Home Purchase Date …. 12/16/2004
Net Gain (Loss) ………. $493,000
Percent Change ………. 46.9%
Annual Appreciation … 7.1%
Cost of Ownership
————————————————-
$1,900,000 ………. Asking Price
$380,000 ………. 20% Down Conventional
4.94% …………… Mortgage Interest Rate
$1,520,000 ………. 30-Year Mortgage
$390,731 ………. Income Requirement
$8,104 ………. Monthly Mortgage Payment
$1647 ………. Property Tax
$375 ………. Special Taxes and Levies (Mello Roos)
$158 ………. Homeowners Insurance
$410 ………. Homeowners Association Fees
============================================
$10,694 ………. Monthly Cash Outlays
-$1614 ………. Tax Savings (% of Interest and Property Tax)
-$1847 ………. Equity Hidden in Payment
$726 ………. Lost Income to Down Payment (net of taxes)
$238 ………. Maintenance and Replacement Reserves
============================================
$8,197 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$19,000 ………. Furnishing and Move In @1%
$19,000 ………. Closing Costs @1%
$15,200 ………… Interest Points @1% of Loan
$380,000 ………. Down Payment
============================================
$433,200 ………. Total Cash Costs
$125,600 ………… Emergency Cash Reserves
============================================
$558,800 ………. Total Savings Needed
Property Details for 24 ROSE TRELLIS Irvine, CA 92603
——————————————————————————
Beds: 3
Baths: 3 full 1 part baths
Home size: 2,650 sq ft
($717 / sq ft)
Lot Size: 6,139 sq ft
Year Built: 2004
Days on Market: 6
Listing Updated: 40316
MLS Number: S617693
Property Type: Single Family, Residential
Tract: Ledg
——————————————————————————
This home features a unique Casita with it's own entrance and it's own full bathroom. Custom Goumet kitchen along with custom hardscape and salt water pool.
The realtor couldn't spell gourmet properly….
I hope you have enjoyed this week, and thank you for reading the Irvine Housing Blog: astutely observing the Irvine home market and combating California Kool-Aid since 2006.
Have a great weekend,
Irvine Renter