Some hard numbers have come out today from the Mortgage Banker’s Association that shed a LOT of light on the foreclosure data.
All that we hear is how much foreclosures are rising and how truly bleak the U.S. real estate market is. But the specific numbers tell a different (and better) story.
It is true: Foreclosures are still rampant on a nation-wide basis. But consider this fascinating little factoid:
California and Florida alone account for more than 73% of the nation-wide foreclosure increase that happened between the first and second quarter of this year.
Stated differently: If one factors out those two states, the foreclosure problem disappears by 73%.
Clearly that’s a theoretical issue as it is impossible to “factor out” markets as significant as California and Florida. But it’s undeniably the case that the incredible weakness in those markets is drowning out the fact that the second quarter of this year saw improvements in foreclosure statistics in other important markets including Texas, Massachusetts and Maryland.
Just something to think about while the news media tells you of the “terrible condition” of our economy.
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That is really amazing. Does anyone have any ideas about whether it makes sense to be involved in Florida and California at all? Looks like things are getting better in a lot of places but those two states are pulling everything down.
Just look at the market like a real estate investor. When the prices get down low enough for the property to generate a reasonable positive cash flow, then it’s time to buy.
Come to think of it, probably what the lending industry needs to do is appraise properties according to income potential rather than the comparable sales. If the income valuation says the house is worth $150K and the potential buyer has offered $200K, then the lender requires the buyer to put down $50K (the difference between the income valuation and the purchase price). Residential comparable sales valuation is driven by emotion, not logic. Lenders should limit their exposure according to income valuation (just as real estate investors do), not the comparable sales valuation.
In that regard, Las Vegas is looking good again for buy-and-hold.
two cents worth. your mileage may vary.
I agree with Jeffrey - If banks would have gone by that true time tested principle we would have not seen today’s mess. But them again my theory is that it all happen on purpose to distract attention to the war.
my dimes worth ….
Terry asks; “Does anyone have any ideas about whether it makes sense to be involved in Florida and California at all?”
My goodness yes!!! I’m an Investor friendly Realtor in Tampa, Florida and the deals to be had are absolutely incredible. If you’re not investing in Florida RIGHT NOW, you are missing some of the best investment opportunities out there.
I’m amazed that investors are not buying in Florida in droves. There are some investors here that seem to buying up properties very quickly and QUIETLY. THEY don’t want you to know because they don’t want the masses here bidding up the prices again.
Contact me and I’ll be happy to show just how incredible these deals truly are.
Just a thought, but I really hate to throw a wet blanket on the idea of CA and FL being the root of the epidemic for foreclosures, but there is an underlying problem which will be coming into view over the next year or so. Not all delinquent loans are being reported as being in foreclosure. You would think if you don’t pay, someone is going to come after you and yes they will when they conclude the best way to rid themselves of the debt. Since I am part of the mortgage industry I follow very closely other reports other than national news. Issues that are not being reported as yet are the large numbers of completed loan modifications the servicing lenders have worked out that are now going into default again. These defaults are being worked out all over middle America. I have attached a part of an article below from Mortgage News so you can see how some of these unreported foreclosures are happening.
By Paul Muolo
THIS JUST IN: We’re hearing reports that some Wall Street firms are auctioning off small pools of mortgages where the loans have been delinquent for up to two years with no foreclosures initiated. One source told us the Street-owned firms haven’t bothered to foreclose because it takes so long. “In Florida it used to be eight months from filing to takeover,” he said. “Now it’s 15 months.” If what this industry veteran says is true, that means the foreclosure figures we saw this past week are actually much worse…
Let’s talk about the payment-option ARM, that wild and wacky loan that Angelo Mozilo’s Countrywide and Herb and Marion Sandler’s World Savings liked so much. According to the upcoming edition of the Alternative Products Quarterly Data Report, the number of firms still making POAs is sinking like a rock. Meanwhile, one investor told us that a majority of homes bought in California over the past three years were purchased using POAs. But have POAs yet gone delinquent in huge numbers or will they begin to go bad later this year and into next? Stay tuned. Meanwhile, according to the new 2Q edition of the Quarterly Data Report, the overall subprime delinquency ratio is almost 30%.
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