Thursday, April 10, 2008

UPDATED: Sac County Sold and Listed Stats

UPDATE: I've also added pending sales to the mix. Enjoy!

There's been some discussion on stats that show the number of distressed properties that are being listed and sold compared to regular listings, so I figured I'd start compiling the data and see what trends we can find. The chart below is for Sacramento County only, as it's just too time consuming to include the other nearby counties. Let me know if you think this data will be helpful and I'll continue to post updates each month.

31 comments :

Max said...

Wow. REOs are dominating the market! This is exactly what we've been predicting.

Dr Doom, here's the proof you were asking for. Two-thirds of all sales, and 60% of all new listings are distressed. I think it's safe to assume that this is what's driving prices, not overall supply levels.

What we need to watch is the listed/sold ratio for REOs. When more are sold than listed, we'll have a near-term bottom.

Patient Renter said...

Two-thirds of all sales, and 60% of all new listings are distressed. I think it's safe to assume that this is what's driving prices, not overall supply levels.

I presume this is why the govt. is tripping over itself to start handing out taxpayer money to anyone at risk of forclosure, whether they brought it on themselves (via refi's, etc) or not.

To me the whole premise that a foreclosure is a bad thing for *most* people just doesn't stand up. Most people have little or no equity to cry over losing. Others will be financially better off renting, and still others simply brought forclosure on themselves via refi's.

Deflationary Jane said...

Caveat - Provided it's not a long term trend. You have to account for saturation at some point. It's still a positive feedback loop.

Regardless, I'm still impressed by the numbers. And thanks for laying it out there.

Remember when we were continuously told that pricing is established at the margins and to expect escalating prices? The term "payback's a b!tch" comes to mind >; )

Max said...

You have to account for saturation at some point. It's still a positive feedback loop.

Inventory looks saturated to me, that's for sure. With overall inventory remaining rather constant (so far), and twice as many REOs hitting the market than leaving, we're essentially seeing REOs driving out the "regular" listings. The "regular" seller is becoming a side-show, while the banks duke it out on the main pricing stage.

As long as the REOs keep flowing, prices will keep dropping, and more "regular" sellers will get in trouble.

Deflationary Jane said...

Max,

what I meant was who is going to continue buying the REOs? If there is all this pent up demand, what happens once that is satisfied? There just aren't enough warm bodies to fill the inventory and if it's just investors buying, look out for a greater jump in leasing revenue.

I think this is the bust's version of a spring bouce. The uptake is about equal with output for a month or two then the feedback gets louder and it's down down down again.

Also, you should see the gap between asking prices and clsoing prices in my search area. There was a vintage house (1880's Italianate) I would have loved; went on the market for 599k, reduced to 399k which was still too high for me. I just saw that it closed for 295,500. Now that I would have jumped on. I suppose I just shake the new owners hand for giving me a new comp **sighs**

Deflationary Jane said...

Whoops, make that a greater decline in leasing revenues

DrDoom said...

Agentbubble:

Thank you. I would not have thought Sacto sales were 2/3 REO and rising. Holly Cow. I appreciate the hard work. I am still digesting the data.

Column 3 "Listed REO" is what I want to watch. It should not be seasonal and I expect it to peak sometime this year. That will mark a turning point.

Thanks again.

DrDoom said...

Max:

I created an excel file that graphs out the inventory levels verses price thingy. It is from Dec 07 and although not perfect it is presentable.

If I can email or post it somehow (I don't know how to do that) you or Agentbubble you can decide if it is worth discussing.

Darth Toll said...

"I suppose I just shake the new owners hand for giving me a new comp **sighs**"

Nah, don't worry about it, you actually lucked out. Here's a good primer I saw on what will transpire with interest rates and the dollar from a very smart and seasoned trader:

http://tinyurl.com/6qm4nf

And the original excellent presentation from Mish:

http://tinyurl.com/5bz6wo

Short version: interest rates are headed much higher later in the year as the government seeks to support the collapsing dollar. I'll add that really what the Fed and the IB's actually want is the mountain of foreclosures (and GOOD GSE paper) for dirt cheap as the paper the IB's currently hold is worthless. Hard to imagine the Sac RE market being immune to the huge macro forces that are aligning as we speak. Anybody that buys now will get destroyed imho.

BTW: I'm only mentioning this stuff because there needs to be a discussion of the big forces at work that may influence the local market in the near future. Sometimes its not as simple as a supply/demand equation that we can quantify with today's stats. What happens to "demand" if interest rates spike to 15 or 20%? It vaporizes.

Sippn said...

Big forces at work?

Since you mentioned it.. WSJ reminded me that global inflation is 7.4% this year ... recall hearing a week or two ago that China is battling 15-30% inflation in its factories.

That should soften or kill off some of the transfer of manufacturing/services offshore.

IMO, REO sales for the first 3 months are just the tip of the iceburg, those were "pre-bus tour get on the bandwagon" sales stats. REO sales will surpass monthly REO additions shortly I predict. Look at current pendings.

DJ - who's gonna buy? Good question. Maybe the UC might find it cheaper to buy a block of 100 rentals instead of building and developing themselves.

DrDoom said...

There are many factors that effect the housing market. It would be interesting to discuss the relative magnitude of each including macro economic forces.

However, some effects can be isolated enough to study separtely so on agentbubbles latest work note that the "odds" of a short sale closing appear to be less than 1 in 10 (719-859 lisitngs, 57-70 closings). I have seen it happen but it is rare and now we have a measurement.

Which leads to a correction on the prior post, REO's are 61% of sales, short sales added another 6%. Clearly REO's are driving factor more so than short sale.

I like to make predictions because it forces me to admit when I not thinking straight. I would expect El Dorado County to have lower % REO sales. Why I not sure but there are fewer sudivisions, a different demographic and prehaps a corresponding difference in financial ability. If it is time consuming I wouldn't track it all the time but one month snap shot might be informative.

Darth Toll said...

"That should soften or kill off some of the transfer of manufacturing/services offshore."

Ever the optimist, that's what I like about you! I would actually agree with you if there was much left that could be outsourced, but because there isn't, I don't.

Now its just time for the dollar to continue its descent into hell followed by massively spiking interest rates. This should be similar to 1931 bond collapse that REALLY kicked off GD2.

DrDoom, I see what you are saying about the need to get isolated enough to make sense of the data and it seems like it would be tough for the macro stuff. Having said that, it seems that some investors are diving into the market with the mistaken belief that all is clear and a bottom is in. If looking only at the inventory and sales data, one could make a case that we are close to some kind of a bottom (although I wouldn't say that yet.)

My point is that the housing bubble wasn't created in a vacuum, even though the NAR would have you believe that all markets are local. Mortgage finance isn't local, securitization isn't local, interest rates aren't local - these and many other things that affect the availability and pricing of local RE are global phenomena! In fact, I would say these things were dramatically MORE IMPORTANT to giant price gains during the bubble years than any modest local influence during that same time. Therefore these global forces should play out just as dramatically during the bust.

Sure, these are complex issues that are difficult to isolate but any investor that doesn't realize what is going on in the macro environment is asking to get their head chopped off, and that is exactly what is going to happen to this latest group of knife-catchers because they aren't paying attention to what is moving the market and what is coming down the pike. Nobody can know with absolute certainty where rates will be in a year, but some very educated people that have been right numerous times before during the bubble and now into the bust are saying that things won't be looking very good in a few months. This is more of Tanta's "whocouldanode" syndrome.

Well, as it turns out, there were many that couldanode and there are many that DO KNOW TODAY what is going on.

AgentBubble said...

I just added pending sales to the chart. Should be interesting to follow those numbers as well!

Max said...

In fact, I would say these things were dramatically MORE IMPORTANT to giant price gains during the bubble years than any modest local influence during that same time.

I bet you could find a common factor between the peak median house price, the absolute minimum teaser payment on that price (neg-am, 110% ltv, arm, etc), and the median income in the area discussed. Is there a "double normalized" Case-Shiller index out there? Normalized for inflation and income?

This is more of Tanta's "whocouldanode" syndrome.

Well, as it turns out, there were many that couldanode and there are many that DO KNOW TODAY what is going on.


The only thing low rates are doing is postponing the day of reckoning for ARM holders. (Mish is the only one who's caught on to that factoid.) Real 30 year fixed loans are at around 7%. For a $250,000 house (current median asking in Sac county), that's > $1700/month including PITI. The math still doesn't work from an investment point of view, just looking at rental income. Therefore, these so-called "investors" are hoping for appreciation to make money!

Wouldanode, couldanode, shouldanode.

Darth Toll said...

"The math still doesn't work from an investment point of view, just looking at rental income. Therefore, these so-called "investors" are hoping for appreciation to make money!"

Thank God there are a few of you good guys out there helping us laymen make sense of this debacle. Great work Max and AB!

DrDoom said...

Absolutely do not want people to think we are anywhere near the bottom of the market. The "max" we are trying to predict is not the bottom of the market but the point where the decline stops accelerating. Prices are headed down. The bottom is way way far away.

Agentbubble: It would be a great personal favor to me if you could include total listings on the new chart. Someone not following the conversation may not realize "listed" means new houses listed that month not total listings at month end. Also if we have total listings I could calulate months-of-inventory which is my hot button (rising or falling?). For example, the increase in sales last month to 1167 relative to total listings of around 9800 puts us at 8.4 months of inventory down from almost 10 months of inventory in Feb. but your new data shows that the %REO is actually still rising ( a big negative) so the decrease in months of supply (a small positive) will be washed away.

I have that comparison (correlation) between price and inventory, from the run up to the fall off, if you want to see it.

Sippn said...

Computer was down, lots to say...

Max - I've said the bubble is completely related to financing - I think I did. Just as the crash is related. I paid no attention to financing until 2007.


What the Case Shiller index doesn't show us the in change in mortgage types. Some where towards the beginning of the index is the start of the common mortgage - 20% down. As down payment % decreased, and teasers or interest onlys increased, prices took off.

Very simple. Same leverage (cancellation of) caused the crash of '29.

Investors aren't looking at the median - they're looking at the bottom where the rentals are - $150s-low $200s. (Can we see the difference between an investor and a speculator?)

Rates will delay and reduce foreclosures some as rates and payments are down about 1/3+ overall. Mish can't be the only one to see this obvious impact.

REOs are dominating the market. Shorts are performing patheticly - almost a non-performance.
The clean deals remaining are actually selling pretty regularly.

Dr Doom - you sure ask for a lot! Oh and most of the REOs and SHorts are in the large growth zip codes - as the new tracts drew a lot of attention from no down/no doc/speculators.

Max - your data is great and I'm sure more accurate and reliable than Zillow. (no insult intended but somebody was asking in a previous thread)

AgentBubble said...

Agentbubble: It would be a great personal favor to me if you could include total listings on the new chart.

Sure thing...I'll update it in the morning for you.

Sippn said...

Speaking about worldwide inflation...


http://calculatedrisk.blogspot.com/2008/04/import-prices-jump.html


Look at your pending stats in a chart. Found this Lyon stuff via Average Buyer..

http://sacramentorealestateblog.blogspot.com/

The trend line is interesting...

Max said...

The trend line is interesting...

It is indeed. I'm more interested in the lag between "pending" and "sales." It looks like pendings began increasing in January, with sales beginning to pick up in March. Is a 60-day escrow period normal? If so, the May sales stats should be large.

DrDoom said...
This comment has been removed by the author.
DrDoom said...

Agentbubble:

Thanks.

And do I read that correctly that there are 2317 pending REO sales on a total listed REO of 2541 or 92% of all REO's have a pending sale?

AgentBubble said...

And do I read that correctly that there are 2317 pending REO sales on a total listed REO of 2541 or 92% of all REO's have a pending sale?

These numbers are all separate: There are 568 short sales that are pending sale and there are 2327 REOs that are pending sale. There are 3753 total homes pending sale in MLS. Does that make sense?

DrDoom said...

Agentbubble:

I understood that part. My question is to compare pending REO's (2,317) to Total REO (2,541) under the heading "Total Inventory" column "REO". That would imply that 91.2% of all REO's already have a sale pending. That sounds high.

I thought the banks were holding on to vacant house for months and months. 91% pending sale says they are readily selling all REO's and not having to hold them. Is this correct? It almost sounds like the banks don't put the house on the MLS until it is sold.

Enlighten me please.

AgentBubble said...

Ok, I see what you are thinking now. Pending and total inventory have no relation. I should rename "Total Inventory" to "Total Active Inventory" as the 2,541 number reflects the amount of active REOs on the market right now. The 2,317 figure represents the current count of pending REOs. This means we have a total of 4,858 REO listings that are either pending or active in MLS. Does that help?

Sippn said...

Not so sure the banks have that much choice in that they're buried, lacking proper staff, etc. foreclosures are seasonal as they are related to purchase date, too. There was some slowdown in foreclosures around the holidays also.

Its looking like, with the current REO inventory (1-2 months) that they have the feeding of the REO market just about right.

Deflationary Jane said...
This comment has been removed by the author.
Deflationary Jane said...

And thank the recent knifecatcher for the lower-comp and getting out of your way for when the good stuff comes >; )

DrDoom said...

Agentbubble:

Got it. It also now makes sense to me that a house under contract (pending) is not considered part of MLS "Inventory".

As Sippn points out the banks are actually moving through the REO's quickly (couple of months) so REO sales should peak a few months after foreclosures peak.

Is there any evidence that foreclosures or REO sales are seasonal? I understand that the original loans may have had a seasonality but isn't it washed out by the time the REO hits MLS?

Sippn said...

Lets assume there was a sales peak season in 2006, many of these 2 year subprime. Lets say March.

In March 2008 when their payment starts adjusting up, defaults begin and REOs begin 90-120 days later on a seasonal basis reflecting the purchasing season.

(unless the quality of the buyer was inverse to the season or some other weird reason, foreclosures would reflect some seasonality)

If the FED rate suddenly jumped back up to 6%, the foreclosures would start immediately without seasonality.

Hey Max, who's generating hate mail?

Deflationary Jane said...

Hatemail?

Hmmm this should be fun, someone run MLS #: 80035396