Friday, August 10, 2007

Distressed Properties Update

The trend continues for yet another month. We've reached a point where more than 25% of all MLS listings are now either a short sale or bank-owned property. We've averaged about 400 new distressed properties added per month since I started tracking this back in November. I'm curious how long this can go on since inventory seems to be at its peak for the year. Worth mentioning: We added 523 "net" listings since last month, but we added 544 "net" distressed properties for the same period. I realize all the new listings weren't distressed, but this is still an interesting stat to think about.

12 comments :

Max said...

Wow, that's a huge fraction. And from what you said before, the true number of short-sales is almost certainly higher since RE agents sometimes don't input that fact into the MLS.

Stunning...

Patient Renter said...

Wow. Thanks for keeping on top of this data. Keep up the good work.

smf said...

"And from what you said before, the true number of short-sales is almost certainly higher since RE agents sometimes don't input that fact into the MLS."

I have to agree. Plus, I know of one house that the people who purchased it HELOCed their homes to buy it. The property should show as distressed, as the owners(flippers) are losing money on the transaction already.

Gwynster said...

Remember how the banks were sitting on their REOs with hyperinflated prices? That's about to change, my darling friends.

The credit crunch is hitting our major lending banks. No one is buying their paper so they have to keep everything in house and for CFC, Wamu, and others, that's really bad.

They need liquidity injections to keep the credit machines oiled. As of now, the Fed is giving them a hand but it won't be enough. They will need to agressively unload those REOs. The threshold

Look for some real changes in pricing in a few months.

Gwynster said...

"the threshold"

Bah, should be "we've reached out threshold event".

Patient Renter said...

"The credit crunch is hitting our major lending banks. No one is buying their paper so they have to keep everything in house and for CFC, Wamu, and others, that's really bad. "

Yeah, the headlines today and everything that has been happening the last few days... I think this is it, the beginning (credit crunch, recession, deflation, etc). I'm heading on vacation, we'll see how it is when I get back.

Anonymous said...

Does anyone know of a good housing blog for the Fresno/ central valley area?

Darth Toll said...

Well there's crispy&cole's blog which gets you in the neighborhood:

http://bakersfieldbubble.blogspot.com/

Diggin Deeper said...

"The credit crunch is hitting our major lending banks. No one is buying their paper so they have to keep everything in house and for CFC, Wamu, and others, that's really bad."

Today, Goldman Sachs reports an investment group has put $3 billion into a fund that had a net asset value of $3.7B. Hmmm. Where have all their investors gone? GS gave them until Aug 15 to cash out and it looks like they're running for the exits.

Portfolio modelling has given way to specific value demands by the investment community and there's no way investment banks can comply. When you can't sell the paper, there's essentially no value to it. This ties in directly to CFC and WaMu as they cannot sell their loans either.

Also today, Beazer delays its June quarterly report stating its having trouble valuing land-development costs and costs to complete houses. Could Beazer be the first premier builder to go under? There have been rumors circling about this for weeks now.

I agree with Gwynster. There's a big pressure squeeze on the banks and lenders from two fronts. On one end there are unsaleable loans. On the other, high inventories of foreclosures are forcing banks to increase loss reserves. This pressure will eventually take its toll as its increasing every month.

While prices have remained at stubborn levels, the banks have no choice but to unload.

Darth Toll said...

"While prices have remained at stubborn levels, the banks have no choice but to unload."

Yes, and as soon as the stocks for these companies get sufficiently hammered and these outfits are struggling for cash and aren't doing much new business, they will unload the only thing they have left of any value - the REO's.

So far, CFC has had a lot of motivation to hold back the flood of REO's as they don't want to negatively affect their book value with a lot of properly priced assets. By properly I mean a heck of a lot lower than what they are currently showing on the books.

With CFC's stock getting creamed lately and the Tanned One selling a lot of stock, my guess is that the flood gates are about to open. This market is about to go from simply awful to something much, much worse.

Darth Toll said...

"While prices have remained at stubborn levels, the banks have no choice but to unload."

Yes, and as soon as the stocks for these companies get sufficiently hammered and these outfits are struggling for cash and aren't doing much new business, they will unload the only thing they have left of any value - the REO's.

So far, CFC has had a lot of motivation to hold back the flood of REO's as they don't want to negatively affect their book value with a lot of properly priced assets. By properly I mean a heck of a lot lower than what they are currently showing on the books.

With CFC's stock getting creamed lately and the Tanned One selling a lot of stock, my guess is that the flood gates are about to open. This market is about to go from simply awful to something much, much worse.

Diggin Deeper said...

"This market is about to go from simply awful to something much, much worse"

Agreed...the only direction the Fed can go is to reflate by reducing rates. Imho,Big Ben will allow inflation to run in order to calm financial fears and protect the RE market. Besides it does wonders for the coffers. Income tax rates are not indexed to the dollar so in order to combat higher prices real wages have to rise...thus driving taxes higher as more people jump into higher brackets. What a sneaky way to get a tax increase without all the ballyhoo.

My bet is that we're in for runaway inflation in cost of goods, and deflation in RE due to overly aggressive price increases that were unsustainable to begin with. And in a market like Sacramento, with a very small cushion regarding economic diversity, it probably gets hit more than most.