Wednesday, February 07, 2007

Distressed Properties - Part 4

Update: I've broken down the distressed properties by year built and price

Year Built
2005-2007 - 141
2000-2004 - 358
1995-1999 - 121
1990-1994 - 174
1985-1989 - 191
1980-1984 - 158
<1980 - 693

Price
<300,000 - 755
300-399K - 638
400-499K - 247
500-599K - 112
600-699K - 48
700-799K - 26
800-899K - 10
900-999K - 2
>999K - 5

In my monthly post on the number of "distressed" properties for our 4 county area, we continue to see a steady increase in listings. Once again, I'm classifying a "distressed" property as either a short sale, pre-foreclosure, or bank-owned property. Let's look at the stats:


In the last 30 days, we've had a 9% increase in MLS inventory and a 30% increase in distressed properties. 1 in every 7 homes now falls under this category. How much higher can we go?

22 comments :

darth toll said...

Thanks Max. It seems as if some of this distressed inventory should be putting serious downward pressure on prices, although right now we're only maybe 10-15% off peak depending upon where you're at.

I've always thought that most flippers (and other recent buyers) would be too underwater to cut the asking price willingly. Therefore when I hear quotes from Realtors saying that they have "stubborn sellers" I think this is a mis-characterization of the actual problem. Sellers won't lower because they can't afford to, and most of the flipper inventory should wind up as REO eventually.

Therefore the question on everybody's mind is: When is capitulation, and is there any way to look at the stats to give us clues as to when this might happen and how ugly it will get?

I don't know that looking at past cycles is that informative due to the high number of specuvesters and subprime 80/20's in the market right now.

patient renter said...

"1 in every 7 homes now falls under this category. How much higher can we go?"

This seems very very high as it is. It would be hard to imagine things could get worse, but they certainly will since it's just the beginning of 2007 and there are a lot of mortgages yet to adjust (up).

patient renter said...

"When is capitulation, and is there any way to look at the stats to give us clues as to when this might happen and how ugly it will get?

I don't know that looking at past cycles is that informative due to the high number of specuvesters and subprime 80/20's in the market right now. "

darth toll:

I'm curious about the same thing myself, how is it that sellers will lower their prices when it often means writing or taking out a loan to get rid of their house? I'm not sure exactly how this is going to work out, but merely seeing that it has happened before, such as in the 90s, tells us that it can easily happen again. I suppose there will be different tipping points for different people, but for many it will probably just be unaffordability due to rising mortgage payments that forces them to sell at any cost.

wannabuy said...

Very interesting. It will get much worse. People will walk. It will get to 1 in 3 homes in Sacramento. :(

Nitpick: either you can predict the future, or you put "2007" for two dates in the table that should be "2006". ;)

Got popcorn?
Neil

Max said...

Thanks Max.

Although I'd love to take credit, this was an Agent Bubble post. :)

When is capitulation, and is there any way to look at the stats to give us clues as to when this might happen and how ugly it will get?

Who knows? If the loan is an 80/20 (or 90/10 or 95/5), the short sale makes sense for the primary lender down to 80% LTV. I have a feeling that the mortgage holders will walk the market down the same way the builders are. Keep their listings 5-10% under comp, and get as much money back as possible.

AgentBubble said...

wannabuy,

This is the second time I did that! Thanks for pointing it out ;-)

Patient Renter said...

AgentBubble: Definately post updated data as these numbers change.

darth toll said...

"Keep their listings 5-10% under comp, and get as much money back as possible."

Makes sense. This would be the "death by a thousand lashes" ultra-slow Japan-style unwind.

I could see things accelerate if there was some kind of a blowup in subprime where some of the lenders started getting a little nervous about their depreciating holdings, or if the Spring brings so much inventory that it is clear a rout is in the cards and the REO's decide to dump for whatever they can get, comps be damnned. Seems kind of like a case of chicken where the lenders see the truck coming (RE bust) but they are holding on until the last possible second to make the books still look reasonably good while trying not to get run over at the same time. Either that, or they genuinely don't see what is coming at all, which would be kind of weird.

AgentBubble said...

For fun, I checked out Elk Grove's stats, and they're at 21%! 1 in every 5 homes...Not good Elk Grove.

Gwynster said...

Meanwhile in Davis, I'm seeing a decrease in the MLS and LOTS more rental ads on CL and in the Enterprise.

I also noticed apt buildings being listed for the first time on a long time. This town smells nervous. I wonder if I'll begin to see soccor moms melt down in the Nugget again over their unsold homes.

Sippn said...

How do you know its distressed again - where are you pulling data?

Gwynster - Davis looks like its back to normal...
$500-800k, >25% listings are pending, above $800, 1/3 are pending - thats pretty good.

FYI having a problem with my google password on Landing site. Oh well, just talking to myself.

AgentBubble said...

sippin--my data comes straight out of our MLS system. When a listing is entered, agents can check various boxes, three of which are pre-foreclosure, short sale, and bank owned. Of course, not all agents know this, but most do. I say this because I still see short sales that don't have a short sale indicator (it's in the comments field only).

Davis sure doesn't have a lot of listings...I only saw 117...For some reason, I expected a lot more.

anon1137 said...

Very interesting stats, but we should remember that most of this damage is happening in new developments. AB's data are for the entire 4-county area. This market is very heterogeneous. I don't think we should expect a lot of pain in desirable, established areas. Davis, especially, is a market unto itself.

Sippn, for posting on Sac Landing, do you know that you have to log in to your Google acct w/your email address and password, but then your post appears in your blog profile name. I had forgotten about that (I'm sure Gwynster is happy I remembered - not!)

AgentBubble said...

I'll run some stats in the morning and break the properties down by age....You bring up a good point and one I want to look into a little further.

Gwynster said...

LOL Anon1137 However lately you're redeeming yourself in my eyes by bashing Bush's agenda. I like to think there's always something I can agree to drinking to with the people I meet >; )

On the Davis front, the campus is breaking ground on a 1100 unit development for staff and faculty housing in a few months and the Cannery proposal is coming up.

Couple that with all the development along RD 102 (aka poleline) that pushes toward the Davis city limit. I see some price pressure coming along down the road - at least I really hope so. If not, there is always going back to plan A which is to leave the state and pay cash (or really damn close).

I also set aside money in a jar on my desk each time I see the yuppie punk's duplex next door take a dump on zillow. Ya gotta find the silver lining where you can!

AgentBubble said...

anon1137 "Very interesting stats, but we should remember that most of this damage is happening in new developments."

I updated the original post to include the year of the home and the price range. Turns out most of the damage is not happening in new developments....

anon1137 said...

AB, you're right. I guess it's not primarily newer homes . . . . seems to be primarily "starter" homes though. So maybe these are 1st time home buyers (or flippers?) who got in over their head.

Sippn said...

Great data... been trying to comment for days. Had a google acct, but isn't working again.

Price range of distressed looks normal, just more.

There will be enough investors to handle several times this amount.

Renters - might as well look at these now - these are future rentals (why people buy).

Sippn said...

Gwynster - how bout that UC subsidized housing?

Davis City council must think "do I approve a big tract of housing and screw my property values or make my kids move to Woodland or West Sac? Hmm. I like going to Club Pheasant occasionally. Maybe I should invest in apartments before the vote."

Sippn said...

SF - While the Mayor was "busy"

..use of historic SF Armory Building by Kink.com for pornographic film production .. Kink.com purchased the Armory after a proposed residential project for the building encountered opposition, a number of community groups and residents have raised concerns over the lack of public discourse on the new proposed use and its impacts on the surrounding neighborhood."

The best part is Kink.coms use of the building was already approved by planning and meets current use description.

Maybe the condo conversion or office builders might have been OK.

Sippn said...

OK I got it!

tom stone said...

The subprime meltdown has begun,20 subprime lenders are out of business since december '06,and the rest are actually underwriting their loans to some degree.the ratio of foreclosures to NOD's is very high,and will only grow.It will be really interesting to see what happens to Jumbo loan $,it is not from GSE's,rather it comes from the same investors who buy subprime mbs,and when they panic,the Jumbo $ will also be affected,they may just turn off the tap.I think they will,sometime this summer...early.At least the foreclosures will help the numbers dataquick reports...1 day on the market,for the loan amount.gotta love it.