It is hard to know what to feel about what the foreclosure numbers mean in a Regional context. What does 2% of the county’s housing units going into some sort of default mean to you or me? That’s 98% NOT in default, right? A Plevelism!
We can respond to the more social aspects, like in Diane’s A Conversation Overheard post. It’s sad and we all now know people in this situation now, but it’s a rarity, right, and not in my neighborhood.
Sometimes you just need to see it to start to getting a grasp on the magnitude of of the situation. We are a visual species, after all. Take a drive around your neighborhood, and take a look at the scorched earth effect. Our climate does not take kindly to forced xeriscaping, and when the funds for TMWA and SPPC payments run out, the desert is quick to reclaim it’s territory.
This is Lennar’s Sterling Pointe, but it could be any neighborhood in any zip code here at this point. (low batteries killed the shots of the 3-pack of scorched earth including, a Chase listing). I’m not trying to pile-on Sterling Pointe - it is just close to my neighborhood - but at least 8 of the 89 homeowners have abandoned their yards and NONE of these are REOs yet. So far, the banks have refused to actually foreclose and inherit the the maintenance cost, HOA and property tax liens.
I know from the numbers that there are at least 1000 REOs cued up to enter the MLS at some point in the near future. There are numerous reports of the lenders increasing their time lines for the initial NOD from 90 to 150 to 180 days. One of my neighbors has been in default for over a year, and their bank still hasn’t made definitive move to up the ante from a NOD to a NOS and seize the property. This is creating a vast pool of "shadow" REOs of a greater magnitude than any of the default action we have seen to date.
I never thought I would see the day where I considered that Bantering Bear might be an optimist.
13 comments
RE: “A Plevelism!”
A Plevelism?
This is blood in the street but no one wants to see it. It is like the government saying prices will rise next year. Could you imagine the sh*t that would happen if the government instead said that prices will drop for at least the next two years.
SJ
Mike - Great post as usual.
Now about the 1000 REO’s lined up to enter MLS “in the near future”
1.) What makes you think they are lined up and will really foreclose? Do you think the banks are waiting for October? To see if they can milk the bailout? As I read the bailout, it could have far reaching consequences, saving once $800k homes and giving them $549k, fixed - secured mortgages here in the Reno area.
2.) Is this on top of the 460 in July, ~400 in August and 400 in Sept [based upon already discussed NOD’s –> NOS calcs]?
3.) If it is really going to happen and be in addition to the already expected amounts…. when…when… do you think this will happen & what might be the trigger?
Gratefully,
D 420
In my real estate practice I encountered many different cases. Sometimes it happens in another way.
From what I am hearing the workouts the banks are offering are just seting up the homeowner for another NOD down the road..
Banks are offering to fix the loan at the start rate interest only and put all the missed payments on the note..So this means the homeowner will even be further underwater
like polishing a turd..polish it all you want..it is still a turd
Mike can correct me if I am wrong, but I believe that when he refers to “at least 1000 REOs cued up to enter the MLS” he is referring not to properties with current notices of default filed against them, but rather to a projection based on the number of trustees deeds issued in 2008. To give an idea of the raw numbers, since January 1, 2008, 1356 trustees deeds have been recorded in Washoe County. Now, not all of these are SFRs; not all were purchased at the trustee’s sale by the note holders; and some have already entered the MLS, but I still don’t think Mike’s projection is very far off.
As for the banks waiting longer to file an NOD, the data seem to support this, but I have not experienced that directly. For example, I am working on a probate case where the bank (Chase) filed a notice of default 108 days after the initial default. What is even more interesting, at least to me, is that the bank was not cooperative at all in negotiating with me (even after I sent in the death certificate, letters of appointment for the administrator, and a request for a forbearance) until the notice of default was filed. I am not worried about the NOD in terms of the property being sold at a trustees sale because the Court will issue a restraining order if we need to go that route, but I am rather annoyed that the bank did not even respond to my requests for a forbearance until after the account had incurred more costs and fees from the initiation of the “foreclosure” process.
Another interesting moving part in this machine is the fact that ARM resets are currently spiking largely from the two year I/O ARMs done in 2006. There are a lot of people who are going to be faced with much higher payments who will not be able to sell or refinance. Take a look at the chart in this article from frontline.
http://www.2000wave.com/article.asp?id=mwo032808
Finally somebody sees me for what I am, an optimist! You got that everyone? Thanks, Mike. But now, you’re the doom and gloomer. And you’re in the industry, no less. Uh-oh, you better watch what you say, it mightn’t jibe with your peers hopes and expectations, and you could really stir up a hornets nest in such a public forum. In all seriousness, I admire you for sticking your neck out, especially since you have a few horses in the race (your parcels for sale).
Honestly, despite heavy criticism and flaming, I’ve never considered my expectations regarding price destruction to be very aggressive. It’s only realistic in my mind, and based entirely upon local wages and historic values, also taking into consideration rampant overbuilding and depleted future demand. Pessimistic would be a Detroit type meltdown which I don’t see for Reno. BTW, there was an article yesterday, I forget the publication, documenting a house advertised on the Detroit mls for $1. Yep, a buck. And the lady paid all cash, baby! The bank even paid back taxes, water bills, etc. at a cost of over $10k just to get the thing gone.
A couple of interesting things here. First, that legislation that was passed a couple days ago has a few very interesting points in it. It’s not just about the Feds bailing out homeowners with bad loans etc, there’s another sidebit of the legislation that allows government at the City of Reno level to purchase, demolish, and redevelop vacant, foreclosed and abandoned/blighted properties. Sooo, I’ll be paying close attention to how much of the allocated $3.9 billion Reno will receive, and what the City of Reno will do and which properties/developments/subdivisions they will choose to acquire/demolish/redevelop.
Also, why does every new house out in suburbia have grass planted? Can you say dumb? How cool would it be to see an entire subdivision with xeriscaping.
Also, are you sure some of that scorched earth isn’t due to homeowners not knowing how to take care of grass in a desert climate? It takes more than simply watering. I have some neighbors in the Holcomb/Wells Ave area who are just fine with their mortgages yet are losing the battle against green grass.
hi we are now sideline arrowcreek buyers, as the scorched earth has visually confirmed the tremendous financial risk of buying in a tenuous area. looking forward to the time reno is upticking. is this link of any iterest? if not, just ignore it http://www.renohomeblog.com/reno/2008/08/arrow-creek-rea.html
The 1000 REOs waiting to hit the market is a bit of an educated guess. You can total up the REOs so far this year (120 more so far this month), subtract out the REO sales posted by the Center for Regional Studies, see how many are listed on the MLS using Guy’s percentages, and come up with ballpark estimate of REO backlog in the wings. It doesn’t really matter if it is 1000 or 800 - it is still a huge number considering our current monthly sales figures. I wish I knew if the banks were holding properties off the market to try to stabilize prices (not working), internal disorganization, or some other plot.
One thing I noticed on my drive-abouts is that scorched earth properties tend to show up in clusters. You can have a couple of blocks where everything looks fine, then have 5 on the next block. They breed.
MVH, Washoe and Reno Planning codes require a certain percentage of you front yard to be lawn area, and dictated the minimum number of trees you must plant and maintain. The CCRs in many developments set the bar even higher. The average home here uses more water for irrigation than for domestic use. Crazy.
JJ, I saw a statistic yesterday that 40% of the parties who had subprime mortgage workouts have already defaulted again. If the lending standards (as I understand them) in the new bailout bill are adhered to, and the banks take their required equity cuts (which won’t happen - they can wait for the next bailout), maybe 7 families nationwide are going to benefit.
“Plevelism” is sort of an inside joke about a poster at ChaseNation who is always a cheerleader, and disagreed with absolutely everything smarten or I ever had to say. Ironically, she lives on the golf course in Arrowcreek - I love the look of Napalm in the morning!
First time poster long time reader.I too have a dog in this hunt and have been trying to sell since 2006 just to make room for a growing family so here is my venting at our current situation. I used be a hard core Republican and loved the liberal conservative debates;however, I have observed that it all is just good cop - bad cop to keep us occupied fighting over trivial social concerns while “they” build false economies based on speculation and bubbles.While we were out buying bigger and better to keep up with the Jones’s and filling it up with the “best” cheapest crap we could buy at Wal-Mart and Home Depot.Our leaders ( on both sides) have let the true long lasting jobs of farming and manufacturing go over seas to be out sourced to China and the pacific rim .It comes at no surprise to me we are at yet another bad bail out.What can we expect when we keep voting for the lesser of the two evils.In our business lives we hire the most qualified candidate in politics we vote for the guy with the least amount of “dirty laundry” so we don’ t get leaders just men and woman that tell us what we want to hear made of plastic.So who do we look to this election to fix this current mess? The Crypt Keeper or The Sleeper Cell ?
Shadow NODs are interesting. Here’s another thing for you:
My house was foreclosed on in September 2007. The notice never appeared on the Assessor’s records! I’m still listed as the owner of record now, and I have data that shows that the property finally sold in June 2008!!!! (And it sold for 30% less than it appraised for in March 2006. But that’s another story altogether.)
Makes you wonder–what’s really going on in the Assessor’s Office?
So consider there may be even more properties like mine out there–where the owners are in default, know they’re in default, but the information hasn’t been recorded by the assessor, and consequently isn’t showing up on anybody’s statistics.