tags| Residential Real Estate | 21 Oct 2008 12:00 AM |
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| Interesting but common sense observation from Mr. Mortgage by Reggie Middleton | Comment (7) |
When I first saw the headlines stating CA sales rose according to Dataquick, but half of them were foreclosure sales, I said, "... but that's bad news!". Mr. Mortgage elaborates .
Today, the daytime financial market variety shows are simply giddy over the DataQuick report saying ‘SOUTHERN CA HOME SALES ARE UP 65% OVER LAST YEAR’.
Sorry to rain on the pom-pom parade, but how I see it home sales worsened yet again last month. Let me explain.
In Sept 2007, there were 12,455 sales of which 12.6% (1570) were foreclosure related. This means last Sept there were 10,885 ‘organic’ sales, which is ‘me selling a home to you’.
In Sept 2008, total sales were in fact up 65% over last year at 20,497. But, 50% were foreclosure related meaning only 10,249 organic sales went off. This is significant and worse than a year ago. Also, remember that last Sept sales plunged by 30% from August due to lenders pulling out of the jumbo market all at the same time so it was not a tough month to beat.
As a point of reference, in Sept 2006 22,654 homes sold in SoCal of which about 4% were foreclosure related leaving approximately 21,500 organic sales. In Sept 2005, 31,740 sold with 30,500 being organic. Now those are robust September sales figures. Ex-foreclosure related sales, Sept 2008 SoCal organic sales are down 66% from three years ago. This goes to show in living color how bad off the housing market actually is.
Organic sales have plummeted as prices have fallen because with values down 40%-70% across the state, so many are underwater. When you owe more than your home is worth you can’t sell or refinance. You are stuck.
Additionally, more than 10k homes in SoCal entered the foreclosure process or were actually foreclosed upon during the month of Sept meaning the problem is getting worse because more inventory is coming in than going out. As a matter of fact over the past six months, over 40k borrowers received a Notice-of-Default each month and 80% of those will end up losing their home to foreclosure.
Lastly, prices fell a sharp 7.6% in a single month, which puts even more people underwater in their homes and exponentially increases the chance of loan default across all paper types.
See his site for the full article.
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