Monday, January 23, 2006

'Confirming Indicators' Up

There is some foreclosure news out this morning. "National real estate foreclosures increased in every quarter of 2005, according to an industry report released today. 'U.S. foreclosure numbers climbed steadily over the course of the year, with more new foreclosures reported in every quarter," said James J. Saccacio. 'This trend appears to be moving the real estate foreclosure market back to its historic levels.'"

"Despite a 29 percent decrease in new foreclosures from the first quarter to the fourth quarter, Florida documented the nation's highest foreclosure rate and accounted for more than 14 percent of the nation's new foreclosures in 2005. 1.5 percent of Utah households entered some stage of foreclosure in 2005, the nation's third-highest annual foreclosure rate. New foreclosures in Texas increased 54 percent from the first quarter to the fourth quarter."

"Other states with foreclosure rates ranking among the 10 highest nationwide were Georgia, Arizona, Indiana, New Jersey, Ohio and Tennessee. All of these state documented annual foreclosure rates of at least 1 percent of total households and reported new foreclosures increasing from the first quarter to the fourth quarter."

"California reported 61,563 properties entering some stage of foreclosure, and new foreclosures increased 16 percent from the first quarter to the fourth quarter. New York reported 37,068 properties entering some stage of foreclosure, and the state reported more than twice as many new foreclosures in the fourth quarter as in the first quarter."

And Biz Money had this Q&A with Mr. Saccacio. "Q: What does the rise in foreclosures predict about New York City housing prices in the year to come? A: They don't predict, foreclosures aren't leading indicators, or lagging indicators, either. They're confirming indicators."

"Q: What's a confirming indicator? A: It validates the real estate appreciation or depreciation in an area. To the extent housing prices are going up, you'll see lower foreclosure rates, because people have the wherewithal to cure the default, through refinancing or the sale of their home."


At 4:19 PM, Blogger Chip said...

Just read this in a link on Patrick's site:
"A home is foreclosed, or lost to creditors, in a legal process that ranges from 27 days in Texas to 290 days in Wisconsin and 455 days in New York, Sharga said."

As foreclosures increase in volume, it would be interesting if you (Ben), or another blogger would keep track of such details state-by-state.

I'm developing an interest in REO/bank-owned properties. The only time I bought one in the past, it was a beautiful lakefront lot and the bank offered it to me first because I already lived in the subdivision. That was 30 years ago.

Now I suspect that savvy banks will use the Internet to their advantage, to get the widest possible exposure for their properties and therefore the highest possible price. This could cramp the style of the foreclosure Websites that give you zero good information unless you prepay a large fee.

At 11:32 PM, Blogger Out at the peak said...

Chip, you are right, the REO market is most likely going to be more highly exposed in the future. This could really cramp our style for finding those gems at dirt prices.

However, perhaps the competition just won't be there because the greedy lost their shirts in this bust.

The foreclosure process is probably going to start varying in the states that don't have set time periods. I know in California, some lenders have allowed borrowers slide with payment for a year before even sending a NOD! I even saw evidence of this when I did NOD look ups. But this was when 20% increases were seen, and owners were given ample chance to refinance. With values declining, perhaps the time will contract to the least possible days.

At 7:05 AM, Blogger John Mc said...

There is one thing to understand here. It may be worse for banks this time around, than in previous foreclosure eras.

This may sound like a stupid truism, however with the newer technologies that are out there (aka the internet) IMHO there should be more transparency as to that fact that the foreclosed properties are in foreclosure, for a reason.

In all probability people paid too much for the property in the first place bearing in mind the economic outlook & that mortgage interest rates have been on the rise for the last year or more.

Some more points to ponder. The last 20 years has seen a credit expansion unlike any other time before, with all the fancy hibrid loans 0% rate teasers etc., People when they go shopping look for the best value in anything they purchase. However towards the end of the housing bubble they see that rising prices were the reason to buy a property, not that it represented good value. & IMHO that is the best reason to buy anything. Was it good value?


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