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Thursday, December 2, 2010
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21 comments:
This article foreclosed home prices claims that foreclosures sold at the largest discount since 2005 when compared to regular homes.
I don't know how they account for differences between these sets of homes, so it could just be a mix issue, but it is real I am surprised. I would have thought that there was a sigma to buying a foreclosed house when this crisis started, but now that stigma is much less if not gone entirely. I really would have expected housing prices between foreclosures and normal sales to shrink over time.
Anyone have any good ideas about why this is happening. My best guess is banks are just trying to get foreclosures off their books to help mitigate some of their foreclosure issues.
I was reading this article about foreclosure sales and the following really shows how screwed up the markets are in other parts of the country.
In Nevada, 54% of all homes sold were REOs or short sales. That was the highest percentage of any state but a slight decline from the second quarter, when 56% of sales were foreclosures.
Arizona (47%), California (40%) and Florida (37%) also had high foreclosure sales. More surprising was that they accounted for 35% of all Massachusetts purchases.
Jeremy-
I agree that the 35% of all Massachusetts purchases is surprising. Boston did not have nearly as bad of a bubble (or collapse) as many other areas.
That is interesting HB. I agree with you in that the stigma should be disappearing now that everyone and their brother knows someone in foreclosure. My guess is part of the disparity in pricing is the condition (Jeremy's article seems to note this).
Still, it is curious either way.
I'm with The Anonymous. Every foreclosure in my price range looks gross even in pictures - gross enough that we don't even bother to go look, because the amount of work for the price is simply too steep (the sum total would go above our ability to pay).
I'd say it's condition and karma.
every REO i have been in reeks of bad karma and the banks don't do squat to keep them up.
They let windows get broken, they do piss poor cleaning jobs ("I've seen ones that aren't even Broom Clean")
Instead of releasing them fast they dick around and let them get cold.
If Cops acted like Banks, they'd just be opening the Lindbergh Baby case this year.
Following on from Ace's comment yesterday about more SOLD emails coming through, does anyone know if the MLS (or Frankly's access to the MLS) is updated every time a place is sold?
The reason I ask is that I get a fair UNDER CONTRACT emails, but very rarely a SOLD.
Maybe that's normal, but I was wondering if once a sale is made if the record is sometimes just deleted, leaving no trace.
Pat
You're right about banks not giving a crap about the condition of their properties if this one is anything to go by:
http://franklymls.com/AR7426857
We drove past it a couple of days after it appeared on the list, and there was a hole maybe 2 feet across in the roof. It was not easy to miss, so much that I was surprised I hadn't seen it in the picture on the listing.
When I got home I looked at the listing again and someone had pretty clumsily Photoshopped out the hole with the clone tool. Cheaper than fixing the hole, I suppose.
Just the other day, maybe two months after the listing date, they updated the remarks to say that there was a hole and that water was getting in the house.
Looking at the listing now to write this, they've taken that wording out again.
Caveat emptor indeed...
Johnny Jewel,
If I add a house to my "favorites" list on FranklyMLS, I get an e-mail when the listing changes comments, lowers its price, goes under contract, or is sold.
You can click the "4yr" or "09/10" box underneath the search box to pull up all the solds for any search criteria.
Sorry I should have been clearer with my original comment. I understand why foreclosures sell for less. They have often been neglected and rarely look good. I was trying to comment on the fact that the article claimed that this gap in price increased. I guess its possible that recent foreclosures have been in worse shape then foreclosures over the last couple of years. I think this is pretty unlikely, because most foreclosures have been trashed for years.
HB -- I think we (or at least I) understood your original comment regarding the spread between foreclosure price vs FMV price.
Regarding your comment:
"I was trying to comment on the fact that the article claimed that this gap in price increased. I guess its possible that recent foreclosures have been in worse shape then foreclosures over the last couple of years. I think this is pretty unlikely, because most foreclosures have been trashed for years."
Actually, I was thinking it was possible. My thought was, in normal times banks were set up to handle X number of foreclosures a year. Thus when the number spiked to X+whatever, they took the easiest to sell (i.e. the ones in the best shape) and sold them first.
Second, I was thinking the removal of mark to market had something to do with it too. When the banks were at their worst (balance sheet wise), and they could ill afford a large loss, it was probably best to sell only those homes where the loss would be small and wouldnt show them as being insolvent. However, now that the banks balance sheets have improved, they can take the bigger percentage loss on the trashed houses now that they have more profit with which to offset it with.
Note, both of these points (especially the second one) were pure speculation. However in any event I was thinking the gap increased precisely because the percentage of foreclosures they are selling are in worse shape than they are historically.
Anon-
Thanks for the clarification. Both of those sound like reasonable ideas.
LJJ
the reason the UC mail to Sold Mail
traffic is almost 2:1 is the Closure rate for properties is dropping.
The problem is Houses, don't appraise, FHA has tightened credit standards, Banks are almost psycho about underwriting.
Whereas in 2005, if you had a pulse you got a mortgage and trust me a few deadmen got houses.
Now in 2010, if Jesus himself walked in with you, they want 5 years tax returns, they want steady employment for 3 years, they want 20% down, they want 30% if it's a declining market. They want credit scores at 750....
So the progress rate is poor.
It's what is so annoying, they issue Prequal letters but they won't progress them.
So you have all those enthusiastic buyers, bidding, and the sellers are all enthusiastic, and a cash buyer like me has to deal with phantom offers.
Anon
Also consider what you said
"The banks couldn't take the hit for 3 years so they held the junkiest properties off the market while their balance sheets healed."
So the Banks were selling the cream and the balance sheets were loaded with toxic crap, and you wondered why guys like me were so bearish on the market and on banks?
http://voices.washingtonpost.com/political-economy/2010/12/congressional_hearing_do_banks.html?hpid=sec-business
A state judge, law professor and consumer attorneys are testifying before Congress that in many cases the banks trying to foreclose on borrowers do not have the legal standing to do so, according to prepared remarks.
New York State Supreme Court Justice Dana Winslow said Thursday in written remarks that "standing has become such a pervasive issue" in the cases he sees "that I frequently use the term 'presumptive mortgagee'" to describe the entity trying to foreclose.
Pat-
I think that is a good reason to be bearish on the market, but I think you keep on ignoring how much better banks balance sheets are compared to a few years ago. Even if they still have the toxic assets on their balance sheet (they actually sold/liquidated many of them), the amount of capital they raised in addition to the profits they have made helped strengthen the banks. Banking is and has always been an unbelievably profitable business so delaying the problem a few years allows banks to increase their capital levels so they can withstand large losses. If you look at any of the major banks they have increased their capital levels by ~50%, reduced their leverage by ~1/3rd and reduced their non-performing assets significantly.
"So the Banks were selling the cream and the balance sheets were loaded with toxic crap, and you wondered why guys like me were so bearish on the market and on banks?"
Maybe? Were you one of the ones who said it "couldnt work"?
I ask because thats really what it comes down to. A few years ago when the MTM and other actions were proposed, (i.e. TARP), we had some bears howling in protest in how it cant work and how it wont work. In essence, it was "futile" for the govt to try anything since nothing would change, and that eventually "all hell would break loose and a TSUNAMI of REO would flood the market".
In contrast to the hyperbole coming from the bear camp, we had rational minds like Leroy, TED K, Cara, CRT (and now today Housebuyer), saying that it very well could work in that (a) banks could drip out the REO a bit by bit and earn their way out of it, (b) it would create a much more shallow bottom and (c) in all likelyhood, create a much longer bottom (in time) while various parties repaired their balance sheets and time healed old wounds.
Now, as it so happened, banks did better than even the rational minds expected in that (as HB notes) we did not understand how unbelievably profitable banking can be. Ironically, had HB been here at the time, we may have branded him a bit of a pollyanna :)
Still, thats beside the point. The issue at the time was the bears (there will be a Tsunami of REO and nothing can stop it). Vs the reasonable minds (there will be a drip drip drip of REO and belief that "all hell would break loose" was foolish).
In the end, I dont blame you too much. You came here a refugee from Mr. Mortgage's echo chamber of doom. He had so poisoned your brain that you were spouting off his insipid garbage (remember when you said "the quickening" was upon us).
Thus, the last year or two on this blog must have been a significant shock to your system as
you have been deprogrammed, a process that continues to this day. Still, its nice to see that you are making progress.
As an aside, im still curious if you really will change your view (that prime parts of "immunington" will eventually suffer a significant leg down) over time.
A while back you said if "it hadnt happened to immunington" by 2012, you would conclude that it wont. Its easy to say a thing like that in late 2008/ early 2009 when 2012 seems so far away.
Thus the true test will be a little more than a year from now when 2012 rolls around. Will you follow through on what you said years earler, or will you pull a Contrarian and focus on the crisis du jour as the reason "it just hasnt happened to immunington yet"?
I do hope this blog is still around as this will be interesting process to watch.
"Contrarian said...You, CRT, Cara, and don't forget Robert, are, to put it nicely, in denial. And now we can add two bozo's named Scott and Ronnie to the list."
That list is getting pretty long by now huh? Looks to me most everyone on this blog is in denial BUT YOU right?
"Contrarian said...To CRT, I guess it never clicked that a 25% drop nationwide in housing prices is, in fact, deflationary?"
And yet, CPI continues to slowly inch up, OH HOW SAD FOR YOU!!!
"Contrarian said...The 'CPI minus food and energy,' is at it's lowest level since the 1960's."
And yet, still increasing. OH HOW SAD FOR YOU!!!
"Contrarian said...We are still in the early phases of deflation. CRT's fantasy, er hope, that throwing trillions on the U.S. economy would stop deflation"
And yet, by your own charts, which you gleefully showed to us the few months there actually was deflation, deflation ended 22 months ago, and CPI is once again nudging up against an all time peak. OH SO SAD...SO SO SO SAD!!!
"Contrarian said...Just what do you think these banks are going to do with the REOs when the bank closures accelerate next year?"
They will transfer them over to the FDIC or other suitor banks, just as they did in 2008, 2009 and 2010, whereupon they will continue do drip drip drip them out, much to your sadness and continued frustration.
"Contrarian said...As a contrarian, Anon, your optimism is a confirmation the worst still lies ahead. The days remaining for your whining are getting shorter and shorter."
And your continuing to lash out at me (along with nearly everyone else on this blog) along with your continued frustration, angst, and deletion after deletion of failed prediction after failed prediction tells me that the bottom has now passed. Or per your latest source, maybe that sunspot activity has increased...
You know, a while back I showed some of your old failed predictions/deletions to a few co-workers of mine, and we laughed and laughed and laughed, (not with you, but at you). One or two of them are now regular lurkers here maybe even laughing at you now, even as we speak. Like the Iraqi information minister of old, you are gathering a cult following!
In any event, thank you, from the bottom of my heart, for being a source of endless entertainment for myself and countless others for the past few years.
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