What's going into escrow - Irvine and maybe some Tustin too

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[quote author="IrvineRenter" date=1210812273]Perhaps you are taking a somewhat myopic view. Prices may very well level out or even rise for a month or two.</blockquote>


I'm taking the view I have always taken. Prices today are a function of months inventory. Months inventory has been going down recently and as a result, prices have been firming.



Prices tomorrow are a function of months inventory as well. Everyone can prattle on about the upcoming REO tidal wave but that doesn't have anything to do with prices transacting in the marketplace today. You won't find any posts of mine disagreeing with the notion that the REOs will come and they will further surpress prices IN THE FUTURE.



Your stealth inventory doesn't change what Average Joe Buyer is agreeing to drop on a house in Northpark this weekend... He sees a 20% discount from peak, limited amount of homes available for him to choose from at this time, and goes for it. That is what has been happening of late...



When the REOs come, and if they are not absorbed (seems crazy to think they ever could hope to be absorbed), months inventory will rise and prices will start cratering again. Personally, I thought we'd have moved through the well-qualified buyer pool already from when sales activity started picking up earlier in the year, but homes are still going under contract at an increased clip.



I thought the "spring bounce" would just be that, and not continue on into the summer. Seems like we could be headed for multiple months of price firming until Q1 NODs play out into REOs in the late summer...
 
[quote author="ipoplaya" date=1210822835][quote author="IrvineRenter" date=1210812273]Perhaps you are taking a somewhat myopic view. Prices may very well level out or even rise for a month or two.</blockquote>


I'm taking the view I have always taken. Prices today are a function of months inventory. Months inventory has been going down recently and as a result, prices have been firming.



Prices tomorrow are a function of months inventory as well. Everyone can prattle on about the upcoming REO tidal wave but that doesn't have anything to do with prices transacting in the marketplace today. You won't find any posts of mine disagreeing with the notion that the REOs will come and they will further surpress prices IN THE FUTURE.



Your stealth inventory doesn't change what Average Joe Buyer is agreeing to drop on a house in Northpark this weekend... He sees a 20% discount from peak, limited amount of homes available for him to choose from at this time, and goes for it. That is what has been happening of late...



When the REOs come, and if they are not absorbed (seems crazy to think they ever could hope to be absorbed), months inventory will rise and prices will start cratering again. Personally, I thought we'd have moved through the well-qualified buyer pool already from when sales activity started picking up earlier in the year, but homes are still going under contract at an increased clip.



I thought the "spring bounce" would just be that, and not continue on into the summer. Seems like we could be headed for multiple months of price firming until Q1 NODs play out into REOs in the late summer...</blockquote>


I think we are seeing the same thing then. I was getting the impression from your earlier posts that you really thought we might be finding a bottom.
 
[quote author="ipoplaya" date=1210821742][quote author="lendingmaestro" date=1210819816]Considering that 95% of NOD's in CA now DO NOT get cured, I'd say that NOD's are must-sells. If someone is now 120 days late and owes 15k+ in arrears, the only they are getting that money is by selling the home.</blockquote>


Yeah, I'm curious to know where that 95% comes from... Here are the DQ number since the beginning for 2006 as posted on Lanser:



<a href="http://www.ipoplaya.com/reorate.pdf">REO Rate</a>



Maestro, are you actually suggesting there are over 18,000 uncured NODs still floating around in the system that will go REO evenutally?



Assuming uncured NODs go REO five months after the NOD filing month, the uncured rate in early 2006 was around 5-10%. That escalated to 40-45% by the end of 2007 and appears to be running around 65% most recently... I can't see anything close to 95% in these figures.</blockquote>


Almost All of the NOD's that are filed are either successfully sold, or foreclosed on. Very few people actually bring their accounts current once receiving an NOD. In California you can forget about it. You cannot assume that all of the NOD's issued in April will be foreclosed on in the same month. BK's can forestall the foreclosure process another 6 months. Different bankshave different time frames. Some borrowers can cure the account but then go deliquent the next month, in which case the bank will probably issue another NOD since one was already issued. The information I am privy to is shared amongst many people in the lending industry.



Here is an excerpt from an article from <strong>1993</strong> <a href="http://findarticles.com/p/articles/mi_m5072/is_n40_v15/ai_14542127">link</a>



""But he conceded that the proportion of NODs that are converted to foreclosure - that is, the borrower did not cure the delinquency in loan payments - has been rising in the last year.



Now, in any month, as much as 85 percent of NODS end up in foreclosure in any month, compared to less than half last year.



That means foreclosures could continue to rise this year and next, because higher proportions of NODs end up in default. "We are seeing increasing proportions of NODs not get cured," said Karevoll.""
 
"Now" as in 1993? I need more current data than that. I know you have better info than I do, and that's why I'm asking. But 15 years ago isn't making it. Very different rules then.
 
[quote author="IrvineRealtor" date=1210824954]"Now" as in 1993? I need more current data than that. I know you have better info than I do, and that's why I'm asking. But 15 years ago isn't making it. Very different rules then.</blockquote>


Yes it was different. Home prices and loan amounts were lower in Nominal dollars back then, and MUCH MUCH lower when compared to incomes. Today you have higher prices, stagnating and /or falling wages, negatively amortizing loans, and a media hell bent on making the "walk-away" phenomenon a household term.
 
The way I like to calculate the "cure" rate, or "NOD to foreclosure" rate is to take the last 6 months of REOs, 3770 from 10/2007-3/2008, and take the 6 months prior NODs, 6866 from 4/2007-9/2007, and you get 55%. The previous period, 4/2007-9/2007 REOs 2101, and the 9/2006-3/2007 NODs 4198, was at 50%. If you took that 50% rate with the 6866 NODs from 4/2007-9/2007, you would get 3433 REOs. The margin of error is 20%, but the ratio has been consistently increasing every month. Now, I think that is a very good forward looking indicator for the amount of REOs to come, and the price drops that come with it. So, taking the 11,358 NODs from 10/2007-3/2008, and a 50% to 60% ratio, there will be 5679-6815 REOs in the next six months. With the significant increase in the NTS numbers, I think that the 60% of 6815 REOs is highly likely.



I totally disagree with Schahrzad, in that REOs don't effect prices. Just go look at the rollback thread, that REO home in Tustin Caycifish posted has been chasing the market down for nearly 6 months, and when it does sell it will be a comp killer. With more REOs coming, and NODs increasing, the NODs are great way to predict more REOs and further price drops. Take a look at the foreclosure thread to see how much the banks are dropping the minimum bid. If they are willing to drop it at the auction, they will end up dropping it just as fast when it gets listed.



<a href="http://www.zillow.com/HomeDetails.htm?zprop=25490689">A great example is 7 Wildwheat, 92614</a>. This home was bought in 10/2004 for $595k, they cashed out a chunk of change to have a NTS amount of $655k, the minimum bid was $368k, and someone bought it for $488k yesterday. I would imagine it was Pacific Legacy who bought it, and if it needs work (Just because the pictures are pretty doesn't mean that it doesn't need work.) the profit margin will be really small, <a href="http://www.redfin.com/CA/Irvine/7-Wildwheat-92614/home/4695588">because it couldn't sell for $575k</a>.



Another great quote from IR in the comments of that post...



"As for the banks not lowering the prices on REOs, just give it time. They are like any other seller hoping for a price. When the market does not rescue them, they will liquidate."



Once again, it is nice to see him being correct.



BTW, the May foreclosure numbers are starting to look like a nightmare of being trapped in a small room with Pat Veling and Gary Watts. Gawd that, and the numbers are a truly scary thought.
 
[quote author="IrvineRenter" date=1210823703][quote author="ipoplaya" date=1210822835][quote author="IrvineRenter" date=1210812273]Perhaps you are taking a somewhat myopic view. Prices may very well level out or even rise for a month or two.</blockquote>


I'm taking the view I have always taken. Prices today are a function of months inventory. Months inventory has been going down recently and as a result, prices have been firming.



Prices tomorrow are a function of months inventory as well. Everyone can prattle on about the upcoming REO tidal wave but that doesn't have anything to do with prices transacting in the marketplace today. You won't find any posts of mine disagreeing with the notion that the REOs will come and they will further surpress prices IN THE FUTURE.



Your stealth inventory doesn't change what Average Joe Buyer is agreeing to drop on a house in Northpark this weekend... He sees a 20% discount from peak, limited amount of homes available for him to choose from at this time, and goes for it. That is what has been happening of late...



When the REOs come, and if they are not absorbed (seems crazy to think they ever could hope to be absorbed), months inventory will rise and prices will start cratering again. Personally, I thought we'd have moved through the well-qualified buyer pool already from when sales activity started picking up earlier in the year, but homes are still going under contract at an increased clip.



I thought the "spring bounce" would just be that, and not continue on into the summer. Seems like we could be headed for multiple months of price firming until Q1 NODs play out into REOs in the late summer...</blockquote>


I think we are seeing the same thing then. I was getting the impression from your earlier posts that you really thought we might be finding a bottom.</blockquote>


We are finding a bottom, albeit in all likelihood just a temporary one... Some time ago, I likened my expectation of home price declines as more a stair-step down vs. something that was more linear. I still believe that is true. More inventory as a result of REOs will cause another step down, which will level once the "happy with 30% off peak" crowd jumps in to buy, and increases in mortgage rates will probably cause the step down after that...
 
[quote author="graphrix" date=1210825875]BTW, the May foreclosure numbers are starting to look like a nightmare of being trapped in a small room with Pat Veling and Gary Watts. Gawd that, and the numbers are a truly scary thought.</blockquote>


I only watch Irvine, but I'd definitely agree with that. It appears there are many more going back to the bank in May vs. April...
 
<blockquote>BTW, the May foreclosure numbers are starting to look like a nightmare of being trapped in a small room with Pat Veling and Gary Watts. Gawd that, and the numbers are a truly scary thought.</blockquote>


LOL. Invite Truthi in there and you've got a party!
 
Guess Average Joe Buyer is not getting the message about future home price declines...



Another four properties going under contract today. Three with DOMs less than 40 days.



<a href="http://www.ipoplaya.com">IPO's Site</a>



One of the four is poor ole 33 Triple Leaf. In escrow again. Hope they get it sold this time.



In my search spec, it would appear May has around 30-35% higher volume in terms of escrows opened than March and April. March and April were quite close in terms of average volume of around 1.8-1.9 units per day. Though it is only for the first half of the month, it suggests to me there will be a material spike in June closed sales over the April/May trend...
 
As far as the NOD to REO percentages - it really is MUCH higher than what is reported... for many reasons.



BK fillings, people trying to work out payment plans, attorney fillings to stop foreclosure, the foreclosure grab 'n flip companies, etc... Sometimes they get extensions to the NTS date as well.



These items DELAY the process. They will not, in the vast majority of cases, prevent it. In addition, basing #'s off of what happened from 2006 - now is COMPLETELY POINTLESS.



In 2006 and 2007, you could still get loans. Values were still there, for the most part. Exotic financing, stated/stated - all existed. Hell, even the FHA and FNMA guidelines were MUCH looser than they are today.



As we sit here today, almost EVERY single property that goes into NOD status WILL GO REO. It might not be exactly 4-5 months in every case, but they will be taken back by the bank. There is no hope for them. Values are way down, refinancing is out of the question for anyone in that situation - there are NO loans, NO banks that will touch anything even close. Most owe too much to actually sell them, short sale or no. IT IS COMPLETELY DIFFERENT than the last 2 years. Asking for current data is idiotic. You won't have the data until it's already done.



And IPOPLAYA, houses are still selling right now. I work with people everyday who want to buy OC homes. However.... very few can get approved for the purchase. I am talking in the 3-5% of applicant range... And the aggressively priced REO's are going to sell the quickest, of course. That's like stating the sky is blue.



Done and Done.
 
"However.... very few can get approved for the purchase. I am talking in the 3-5% of applicant range"



As you are in the "trench", I will take your word for it for 3-5% you mentioned above. I am curious though why the large % of irvine homes went into escrows are actually closing per IPO's data? Where is the disconnect between your 3-5% number and the large % in irvine?
 
Cash purchases would be one. People paying cash do not need to call about financing. High net worth clients also generally get loans through the investment houses that hold their portfolio of securities.
 
But if you look at the "down' analysis done by IrvineRealtor, large % of the purchases in Irvine are financed. So cash purchases are not really a key market driver here based on the data.



In terms of the investment houses asset backed mortgage, I know very few people take advantage of. Again, I have a hard time to believe that segment plays a key role in irvine. Also, for high net worth clients, why would they tie their assets to an otherwise non-recourse loan? This still leaves us with the question of why the folks in Irvine can still get financed.



I think understanding this is important as many of us (including myself) thought the credit is hard to obtain, therefore houses are not moving. The Irvine closing data doesn't support this "lack of credit" theory at this point.
 
[quote author="Masterofdamoney" date=1210830382]As far as the NOD to REO percentages - it really is MUCH higher than what is reported... for many reasons.



BK fillings, people trying to work out payment plans, attorney fillings to stop foreclosure, the foreclosure grab 'n flip companies, etc... Sometimes they get extensions to the NTS date as well.



These items DELAY the process. They will not, in the vast majority of cases, prevent it. In addition, basing #'s off of what happened from 2006 - now is COMPLETELY POINTLESS.



In 2006 and 2007, you could still get loans. Values were still there, for the most part. Exotic financing, stated/stated - all existed. Hell, even the FHA and FNMA guidelines were MUCH looser than they are today.



As we sit here today, almost EVERY single property that goes into NOD status WILL GO REO. It might not be exactly 4-5 months in every case, but they will be taken back by the bank. There is no hope for them. Values are way down, refinancing is out of the question for anyone in that situation - there are NO loans, NO banks that will touch anything even close. Most owe too much to actually sell them, short sale or no. IT IS COMPLETELY DIFFERENT than the last 2 years. Asking for current data is idiotic. You won't have the data until it's already done.



And IPOPLAYA, houses are still selling right now. I work with people everyday who want to buy OC homes. However.... very few can get approved for the purchase. I am talking in the 3-5% of applicant range... And the aggressively priced REO's are going to sell the quickest, of course. That's like stating the sky is blue.



Done and Done.</blockquote>


Master must be going for his realtor's license... Just finished the "Writing for Emphasis with CAPS" class I see. :)
 
[quote author="irvine123" date=1210832301]But if you look at the "down' analysis done by IrvineRealtor, large % of the purchases in Irvine are financed. So cash purchases are not really a key market driver here based on the data.



In terms of the investment houses asset backed mortgage, I know very few people take advantage of. Again, I have a hard time to believe that segment plays a key role in irvine. Also, for high net worth clients, why would they tie their assets to an otherwise non-recourse loan? This still leaves us with the question of why the folks in Irvine can still get financed.



I think understanding this is important as many of us (including myself) thought the credit is hard to obtain, therefore houses are not moving. The Irvine closing data doesn't support this "lack of credit" theory at this point.</blockquote>


You were asking why only 3-5% of the people qualified for loans. Everyone would LIKE to own a home, but that doesn't mean they can qualify. Few people can by today's lending standards. You are not looking at the whole picture. How many sales are there compared to how many people living in Irvine, OC, USA, and the world? It isn't only Irvine residents buying Irvine houses. You don't see the applications that get denied, all you see is a house closing escrow. 500 sales sounds like a lot when you look at just the number, but when you compare it to millions of people it is a drop in the bucket.



Also, purchase applications and refinance applications are much different. The much more refi applications get denied than purchase applications. People NEED to refi; they don't NEED to purchase.
 
[quote author="Irvine Allergy Dr" date=1210833082]"I personally think we might hit mid 90?s price points."



Awesome. I'm going to be able to buy two properties and not even have to sell my current home. Rental income here I come!</blockquote>


Hey doc, did you look at Zielian Ct? Probably too small for you given the props you've been looking at... I through down an offer and as expected beat out by a higher bidder.
 
[quote author="irvine123" date=1210832301]But if you look at the "down' analysis done by IrvineRealtor, large % of the purchases in Irvine are financed. So cash purchases are not really a key market driver here based on the data.



In terms of the investment houses asset backed mortgage, I know very few people take advantage of. Again, I have a hard time to believe that segment plays a key role in irvine. Also, for high net worth clients, why would they tie their assets to an otherwise non-recourse loan? This still leaves us with the question of why the folks in Irvine can still get financed.



I think understanding this is important as many of us (including myself) thought the credit is hard to obtain, therefore houses are not moving. The Irvine closing data doesn't support this "lack of credit" theory at this point.</blockquote>


Master and Maestro keep forgetting that "Irvine is different". Potential Irvineites are well-qualified, 27% down, high FICO buyers. They can afford whatever they want and aren't buying in droves right now because not enough houses have CaesarStone counters yet. When sellers figure out that yesterday's Pergraniteel is today's DistressedCaesarSteel, sales volumes will go through the roof!
 
[quote author="ipoplaya" date=1210833444][quote author="Irvine Allergy Dr" date=1210833082]"I personally think we might hit mid 90?s price points."



Awesome. I'm going to be able to buy two properties and not even have to sell my current home. Rental income here I come!</blockquote>


Hey doc, did you look at Zielian Ct? Probably too small for you given the props you've been looking at... I through down an offer and as expected beat out by a higher bidder.</blockquote>


Which one on Zielian? I think there have been 2 or 3 for sale. I do remember keeping one in my Redfin list for a while before it went to escrow.
 
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