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Thursday, July 30, 2009
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37 comments:
Much good stuff in CR today:
Surge in foreclosures in June?
This is Seattle, Phoenix and Las Vegas not here, obviously, but maybe our surge is just around the corner? Hope for cheaper prices springs eternal!
summer 2005 purchases + 3 year teaser rates + 12 months to act on it = surge nowish? or maybe we're going to see 2006 buyers?
(just hope they don't do something foolish like actually implement $15k for all buyers in response to this wave of supply)
and via Patrick a link to the Government accountability office report on Characteristics and Performance of Nonprime Mortgages
if anyone wants to mine it for NoVa or DC area data, the full pdf is available from that page.
Anyone interested in an orange line condo in Arlington, the foreclosures on investor units started yesterday at 1021 Garfield. First unit out is 746 sf 1 bedroom priced at $294,000. This is well below this year's last short sale sold price of $330,000 or regular sales in the $355,000 to $389,000 range. It will probably get bid up but as more come on the market might not be able to sustain the prices.
If you look at the maps, Virginia and Northern Virginia aren't doing too badly compared to anywhere outside of the plains states.
Specific numbers are in the enclosures:
Status of Nonprime Loans Originated from 2000 through 2007 by Census Division and State as of March 31, 2009
This enclosure contains the results of our analysis of LoanPerformance (LP) data on the status of nonprime mortgages by Census division and state. The analysis covers mortgages originated from 2000 through 2007, as of March 31, 2009. Tables 14 and 15 provide information in percentages and total numbers, respectively.
State Virginia
Market segment Subprime / Alt-A
Prepaid 63.49% / 42.53%
Current 14.77% / 37.82%
Delinquent 4.25% / 3.62%
In default 4.05% / 3.47%
In foreclosure process 1.90% / 2.75%
Completed foreclosure process 10.52%/ 9.10%
Unknown 1.03% / 0.70%
Total 213,215 / 162,599
Virginia
Subprime / Alt-A
Prepaid 135,376 / 69,161
Current 31,496 / 61,489
Delinquent 9,051 / 5,893
In default 8,629 / 5,650
In foreclosure process 4,047 / 4,478
Completed foreclosure process 22,421 / 14,797
Unknown 2,195 / 1,131
Total 213,215 / 162,599
Status of Nonprime Loans Originated from 2000 through 2007 by Congressional District as of March 31, 2009
This enclosure contains the results of our analysis of LoanPerformance (LP) data on the status of nonprime mortgages by congressional district. The analysis covers mortgages originated from 2000 through 2007, as of March 31, 2009. All figures reported are estimated.
Estimated number of active loans
Estimated number of seriously delinquent loans
Estimated percentage of seriously delinquent loans
Virginia
01
14,898 active
2,941 delinquent
19.74% percentage
02
11,582
1,535
13.25%
03
12,125
2,023
16.68%
04
11,878
1,985
16.71%
05
6,234
764
12.26%
06
5,922
788
13.30%
07
11,408
1,838
16.11%
08
12,230
1,869
15.28%
09
3,058
358
11.69%
10
21,147
4,282
20.25%
11
19,809
4,351
21.96%
So, which districts are we? Primarily 8, 11 and 10?
10 and 11 have 4,000 some seriously delinquent non-prime borrowers, the sum of those rivals the total current inventory in FFX! District 8 has 1000. compared to an inventory of something like 2000? The districts don't line up well with the counties that are used for inventory, but clearly, there's a lot of motivated sellers coming down the pipeline, enough to keep inventory at or above current levels for a long long time. 1000 delinquent borrowers doesn't seem like much until you compare it to only 2000 homes on the market.
Now these are estimates. and the boundaries don't map well, and my earlier analysis of the ACS data indicated a whole lot of well-to-do renters sitting on the sidelines in 2007, but clearly inventory is unlikely to disappear.
Especially given that non-prime borrowers are only a small slice of the total mortgage picture of potentially motivated sellers.
That's my take-away, have at it.
anielarke,
Any idea how many of the condos at 1021 are occupied? 294k seems like a pretty good deal on a 1BR in that area...though I guess you get stuck with condo fees as well. The owner of the smaller 1BR condo we were renting in the Williamsburg was able to sell his place for around $350k and it's 15 years old with a crappy view and location within the building.
Also Anie I really enjoy all of the inside stories and history about NoVA that you've posted on here. It's truly interesting and informative stuff. Thanks!
Here's the daily show clip that NovaWatcher mentioned yesterday:
Geithner tries to sell his house
Thanks Jeff B.
That was awesome.
Jeff The on-site office said about 50 to 60% are owner occupied but said to check it with the management company (CFM). Others are investor held and mostly rented. My agent says at least 10 will be foreclosed on through the fall. The tenant just moved from the one at $294,000. There were 7 agents in the condo w/clients when I saw it. I don't really like the building (it is already showing extreme wear and tear and its poorly-built flaws), so I am not going to buy one. I was just trying to get a sense of the value. It would be okay at $294,000 but from the activity it will probably go closer to $325,000. The condo fee is $289. The subsequent sales might be better as the demand I saw yesterday is met by the larger supply coming. The Williamsburg is a little dated and the units are boxy, but at least Dittmar builds a good product. The Carlyle Group developed 1021 Garfield and they know about money but don't know about construction and hired just about anyone to get the building completed and sold before the end of the bubble. Many of the original sales were to investors who flipped them, the investors who did not flip in time are in or headed toward foreclosure.
You have to know the right real estate agents to get all the inside info and market stories. My Arlington agent is definitely in the loop.
Thanks for the Daily Show link, Jeff B. That tile problem could quickly be cured by a more realistic price!
Ace-
Agreed price is clearly the issue, but I think they are being a little unfair claiming 2004 was the peak and prices are down 30% from the peak. While the second comment is true, 2004 was not the peak and prices are only down 5-10% from 2004 in most areas. My guess is the bigger issue is people just aren't buying $1.6MM houses right now.
Re: Timmy's house,
It is also the case that he probably plans to move back there someday, such that unless he can sell for more than he paid, he has no incentive to sell.
re, the GAO numbers, note also that the total number of currently delinquent, in-default and in pipeline loans exceeds the number of completed foreclosures to date. What's coming in the next 12 months exceeds the total we've had so far from this pool of loans.
And of Virginia, Districts 1,10,and 11 have the highest percentage of seriously delinquent loans. Around 20% of this type.
Since I think these bad loans are the tip of the iceberg compared to distress for economic reasons on "prime" loans, I see a lot more room for downward movement even here in NoVa. This supply's not coming all at once, and it's an open question if pent-up demand exceeds this supply.
Basically, I see a lot of things that could bring prices lower, and nothing that will move them higher. Distress, higher interest rates, job losses, income losses, more bank troubles...
agreed, HB!
I should add that he ought to consider getting a pro to paint his tile with the special paint that is available for this purpose - to neutralize it. Timmy needs to watch HGTV!
Cara, The summary is based on first quarter data ending 3/31 with 11% in default and 12% in foreclosure status. In Va., we move out smartly on foreclosures. I really don't think this is an issue or shadow to the PWC market. I've been watching trustee notices and roughly checking MLS and yep, they show up after the courthouse Trustee Sale notice or they sell in a SS before the Trustee Sale date. Now, I have heard and I believe it to be factual that HUD is getting ready to dump and dump bigtime..VA/DC/MD..I took the Va. to be Fairfax. I heard this about a week or less before FHA came out with their sweet deal for some zip codes or markets.
Cara,
Regarding your wait comment in yesterday's post. I am waiting. I'm just bitter. :) That's why I picked "tiredbubblewatcher."
I stupidly thought when the bubble burst it would take 1-2 years tops to go back to normal. In retrospect, of course it is going to take a lot of time to get out of this mess. It took us 6-8 years to build up this bubble so it might take 6-8 years to finish it.
anielarke,
I looked that up -- that is the "Clarendon 1021" condo? I remember looking at renting a unit. The investor owner admitted it had been vacant for a year since he bought it. He then asked for a rent price that was insane. I had thought I was going to get a better deal renting someone's condo than renting at a Dittmar Company or Archstone building.
I then realized if I wanted a newer building it was oddly enough better prices going with a managed building. I suspect years later things might be back to normal where renting someone's condo is cheaper than a managed building. But there was a period where people seemed to think whatever amount they paid on PITI + condo fees was what they could ask for in rent.
Arkey,
What's the sweet FHA deal you're refering to? I haven't heard about it...
I tend to agree, I have a hard time believing there's much more distress that can be wrung out of PWC. I think the weak hands are pretty much gone there.
In terms of the long term inventory, I was thinking more of the base of delinquent borrowers and current borrowers with these loans. Given that such a huge percentage of them have already defaulted, it seems likely that more are under similar duress, just holding on longer. The other thing in the report as a whole was that the vast majority of these non-prime loans were re-finances not purchase loans. (and that many refinanced into non-prime loans multiple times). This is consistent with what I'm seeing in terms of short sale listings. The bulk of the shorts were purchased for well under current prices, at least where I'm looking.
tbw,
yeah, patience sucks sometimes. But aside from the Anonymous who's been waiting since 2003, I think it will be richly rewarded.
Cara,
There are definitely upsides to apartment living -- flexibility, less maintenance, building management will fix/replace appliances for free when they break, etc. It's great only thinking about whether the place is what I want for the next year instead of next 5-10 years.
Of course, once the market is normal again and PITI is at or near rent then it's great to own to "save" the P portion.
Cara, I can't find what I was referencing in the public domain altho I'm positive I read it there. I'll keep checking..but..it has to do with paying closing cost and such in addition to the 8000
Wow here is a huge threat. Read the comments
http://franklymls.com/FX7098802
They make it sound like everyone will lose out. "FINAL PRICE! Seller will withdraw if not sold by 30th Aug!"
They are listing there house for 20K more than they bought it for in late 2007
housebuyer: but it is $80k less than someone else paid for it in 2005. The current owners bought it from JP Morgan/Chase in 2007.
So, if it doesn't sell by August 30th, is there a chance that this place will be foreclosed on again? Talk about knifecatchers and a cycle of price discovery!
Cara,
I agree, there'll be more supply due to REOs coming to the market in the fall, I already saw the data on how much mortgage pools remittances were due to REO in last couple of months, that'll drive the prices down. And the rates cannot go down much lower than they were in the spring, so there'll be less demand.
I'm not sure that it will be possible to get a lower payment than in April, but pricewise --- way to go...
housebuyer,
09/27/2007 $430,000 JPMORGAN CHASE BANK BUDHATHOKI YUBARAJ
08/24/2007 $431,100 YAWATA MARIA B JPMORGAN CHASE BANK
11/17/2005 $525,000 BROWN LAURA A YAWATA MARIA B
01/02/1996 $169,000 BROWN LAURA A
Seller bought a foreclosure in 2007 and probably suspected she(?) would run a profit a few years later. Instead she caught a falling knife.
2009 $438,650
2008 $455,930
2007 $501,580
2006 $482,530
2005 $382,480
Ran the last name in washingtonpost.com. This is an investor:
01/09 BUDHATHOKI YUBARAJ DEUTSCHE BANK NATION 10111 COPELAND DR Manassas, VA 20109 $95,000*
09/07 BUDHATHOKI YUBARAJ JPMORGAN CHASE BANK 6762 BROOK RUN DR Pimmit, VA 22043 $430,000*
These might be spouse/relatives?
01/09 BUDHATHOKI BISHNU B NVR INC. 3910 BEEKER MILL PL Fairfax, VA 20151 $156,789
03/09 BUDHATHOKI KAJEE B JPMORGAN CHASE BANK 13704 FLOWING BROOK CT Fairfax, VA 20151 $160,000
Oddly enough the home you found does not show up in the name search on washingtonpost's real estate records. I wonder how many homes this person has.
Housebuyer,
Yeah, I think that's such an odd thing to say in a listing. I guess maybe they are trying to communicate to people who might have seen it and are interested but were waiting for a price reduction, that they aren't going to sell at a lower price (and maybe are planning to rent it out). But I kinda think if someone was interested in buying it at that price they would have put in an offer already. However, I saw it another listing, below, but it actually seemed to work as the condo is now under contract:
http://franklymls.com/DC7028039
tbw,
I was talking to a co-worker yesterday who is trying to sublease a room in his rental townhouse and we got to talking about the current rental market. His impression is that a lot of people are looking for rentals but there are way too many rentals available right now.
Anyway I think the shenanigans of management companies are really sticking it to owners that are trying to rent. When we were looking for a place in May pretty much every managed building had discounts out of the wazoo to entice people into their rentals. But they wouldn't budge the rental price at all. They'd give you 2 months free rent, effectively lowering your rent, but they wouldn't touch the monthly payment. If you're a landlord trying to rent out your place you look around and see the 1 BRs around you going for $1800 a month so that's what you ask for yours...maybe not realizing that the effective rent on those places is much less. I think it's propping up the rents in this area.
Laura Brown is probably a common name but I did find that a Laura A Brown bought on 2/16/06 (mere months after that Falls Church home sold on 11/17/05 for a bubblicious $525,000) a home in the eastern part of Capitol Hill for $575,000 (532 9th St NE).
That's how you do it. Brown probably laughed all the way to the bank that she got $525,000 for a home she paid $169,000 less than ten years before. Assuming she had saved up some money she might've bought that rowhouse for cash. Now she's set for life.
For those who did not significantly move up homes (or even moved down homes) when they sold in 2004-07 they practically won the lottery.
tbw,
well, it depends where you moved, i think moving to capital hill is a good idea, but if somebody bought similar price place in pwc or ashburn --- would be burned, it's not only size, but location.
friend of mine sold his th in alexandria in 2005 for 475k (200k profit in 4 years, th was paid off by that time), couldn't convince some guy in potomac to sell his older fixer-upper sfh for something like 640 (ended up selling it for 550 year later), so rented for 3 years a house in bethesda near metro and then bought it this spring for 200k less than it would sell in 2005 based on comps. that's winning a lottery.
Konstantin,
Actually I think it's likely her Capitol Hill rowhouse or whatever it is will be worth less than $575,000 (if not already). But assuming she paid cash or got a mortgage for the remaining $50-100k or so it's not like it really matters if the home ends up being worth $400-500k.
Outer Capitol Hill was gentrified this decade like Shaw, Columbia Heights, etc meaning it's got high volatility. What's good news for these neighborhoods is the DC homicide rate is down even during the recession. Maybe these neighborhoods will not become the hood again.
I agree with you though that selling for bubble profits, renting a few years, then buying was the best course. But selling and using those profits to buy a place in full was a good thing to do as well.
I worked at a biotech firm for most of the bubble and had two close co-workers move to Indianapolis to work for Eli Lilly in 2006-2007. Now THAT's winning the lottery. They each pocketed 200k+ on the sale of their houses and moved to one of the cheapest markets in the country.
a possible, mildly mitigating factor on the GAO data, which may be what Arkey was referring to.
Since this was 3/31 most of the ones in the foreclosure process are already in the inventory either as REOs or shorts. This probably leaves just the delinquent bucket as inventory that is yet to come online. Since that is about 3/5ths of the total distress, that puts coming new inventory at around 2k-3k for FFX.
This is just one source of future distressed inventory as I said before, but by itself this may not be enough to tip the balance further.
That $8k is making the lower rungs heat up like I would never have believed. I guess those who weren't thinking about buying this year have taken until now to get their act together sufficiently to start making bids. And time is now of the essence, at least until they extend it.
Any inventory under $325k in price that can get dumped for quick sale now in Burke, will easily get gobbled up.
Going to our inspection shortly. Not sure which I'm hoping for. Something disasterous so we can back out of this, or everything reasonable, and the rest of the sale to go through smoothly. It's anything in between these two extremes that worries me most.
very interesting property finds all btw.
Cara - I think your analysis is sound, however the only problem with expecting to see more inventory is that giant black hole known as "bank owned" from which apparently nothing can escape.
Recall that a year ago, we got breathless reports, surge in foreclosure... banks opening the flood gates... higher inventory will crush prices...
Thus, the presumption was inventory (which people thought was low last year) would surge higher in 2009. We all know what happened next:
http://www.recharts.com/nova/nova.html
There is a certain "Waiting for Godot" element to this whole thing. Will the floodgates ever open? Are they open now and they are going in bulk off the MLS? Are they open now and we just dont notice? Were they going to be opened but now delayed? If so how long? Weeks? Months? Then another delay...How long? Weeks? Months...
I think its probably wise to wait til we see actual evidence of rising inventory locally before we ascribe meaning to it. Dont ignore reports like this - but at the same time ask yourself, is this something new, or is it reinforcing something which you already knew could happen, but so far hasnt.
CRT, I just don't put any stock in the info provided because it has to many variables and to many hands touching the data. Yes, you can count NOD's but really what does it mean. A NOD can be sent as we have seen here recently for 1 late payment. The court filings of forclosure and I know all courts aren't efficient or standards in place, then the county has to record the foreclosure before they can ever file a sale...and then..you have the SS 2 or 3 weeks before the Trustee sale. See what I'm getting at. To many hands in the fire to accurately or even venture a halfazz guess if you ask me. I can't even think of how many hands it must go through on the mortagage side with second and any thirds and I don't have a clue how backed up the counties must be filing all this information.
CRT,
I think foreclosures are still mostly irrelevant to what will ultimately happen. It'd be nice if there was a flood of foreclosures -- it would speed the process up. But I think there are enough knife catchers, banks dribbling out inventory, and gov't tax credits/low interest rates to REALLY drag this out.
We are in a staring match between buyers and sellers. *A lot* of sellers think they need only wait until 2010-12 to get their 2006 price again.
At some point though the fact that their property tax assessment has gone down in 2007, 2008, 2009, 2010, 2011, 2012 sinks in. Anything that was not foreclosure central in 2007-08 is probably going to drip down 5% a year or so.
I think the bottom will be in 2012for most homes in the area given how slow it goes if you don't have a glut of foreclosures. The only way it's quicker is if the gov't dramatically raises the Fed rate and I don't see that happening any time soon.
CRT, (arkey too later in the paragraph)
Yes, my conclusion was that I expect inventory to remain at current levels for a goodly time going forward since there are roughly as many future foreclosures as there have been ones to date. We and banks are not going to run out of these things, so whatever the process is whereby they reach the market is already baked in. Unless they change their methodology, whatever they have beeen doing that has resulted in X rate of foreclosures/SS on the MLS will continue to result in X rate, because the stream of pipeline foreclosures and seriously delinquent borrowers and borderline borrowers is just as large going forward as it has been in the recent past.
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