“You can’t have a better tomorrow if you are thinking about yesterday all the time.” - Charles F. Kettering, Inventor
This month we’ll take a quick look at 2011 while giving our data a full-body scan, and if our full-body scan reveals something of interest, we’ll give that data a thorough pat down. Why? The answer is simple: so our readers can feel safe with the information we provide.
This just in, B of A is back in business. The Bank of America foreclosure moratorium ended December 6th, more to follow.
Ding Dong the Witch is Dead
In November, Maricopa County saw 5,891 new notices of trustee’s sale filed. While this is still an extremely high number, it’s the lowest number we’ve seen since the 5,879 of April 2008, when the foreclosure party was just heating up.
The optimist in me wants November to be the beginning of the end, the time when new notices start their inevitable decline, just as April 2008 was the beginning of the beginning. New notices cannot stay at current levels forever; eventually we have to return to a normal market.
This week Housingwire reported, “The serious delinquency rate on single-family mortgages held by Fannie Mae was 4.56% in September, a 16 basis point drop from September 2009 and the first yearly decline since April 2007.”
Let’s face it—the reason for the decline: foreclosures. The new loans coming into the pool have made it through strict underwriting protocol while the bad loans just keep getting sent to the courthouse steps, and once they’re foreclosed, they’re no longer delinquent.
Good in, bad out; delinquency rates had to improve. Regardless of the reasons for the decline, declining notices and declining delinquencies are still encouraging at the least. It’s also encouraging that the yearly running totals of newly filed notices are down 16.60%, from 103,219 to 86,082. The ninety-day averages are also down 12.23% from those that we saw last year at this time, from 23,304 to 20,453.
These numbers may not make us smile, but they can make us at least relax our frowns. I’d love to jump on my chair and sing, “Ding dong! The witch is dead. Which old witch? The wicked witch is dead.” But just as a “witch” rests because of an exhausting Halloween or a tough Connecticut senatorial race, foreclosures are resting, at least in part, because of the annual holiday season respite.
Trustee’s deeds hit 33-month low
While the yearly and quarterly number of new notices filed offer guarded optimism, the 37% decrease of recorded trustee’s deeds from the previous month is meaningless. Yes, trustee’s deeds hit a 33-month low.
The reason? Bank of America was on foreclosure vacation. The 2,698 properties foreclosed on in November was the lowest total since March 2008’s 2,365. Bank of America’s moratorium began October 8th, and it ceased yesterday, December 6th.
Of all B of A sales scheduled for December, 8,080 were moved to January or later, which was the vast majority. Of the 591 still scheduled in December, 196 currently have opening bids. Expect December foreclosures to remain at lower levels, and expect this trend into early January, since it normally takes B of A two weeks after the auction to record each deed.
Now that their moratorium is over, they’ll have two months of foreclosures to catch up on, which almost guarantees near-record foreclosures in the coming months. These numbers will most likely be reflected in March’s recordings.
Foreclosure activity always declines over the holidays: a gesture of kindness which usually lasts until the second week of January, when most New Year’s resolutions have gone wayside and it’s back to business as usual.
REO numbers down, pending numbers up
One of the numbers frequently requested and tracked by government agencies is the combined total of REO properties and active notices. We ended November with 19,966 bank- or government-held homes and 39,964 homes with active notices. We began tracking these numbers 19 months ago, and in that time frame there has been visible movement in the two components.
In the last 19 months we’ve seen REO extremes with a low of 13,377 and a high of 20,821, and active notices have moved between 47,606 and 39,229. But when we combine the REO total and the active notice total on any single date, we never stray more than 5 percentage points from 60,000.
Today’s total is 59,930. The high of 62,123 occurred in February 2010 as we moved into the final months of the tax credit, and the low of 57,216 occurred in June 2010 just after the credit expired.
This month we saw REO inventory decline by 855 and pending active notices increase by 229, which is exactly what one would expect. Remember, Bank of America stopped foreclosing; they did not stop filing new notices.
The bad news
One of the toughest monthly opinions I had to write was in July of this year, just as it became apparent that our market was starting to back pedal. The “bad news ahead” warning we issued in July has now manifested itself in national reports, and the declining prices we predicted have occurred.
The doomsdayers will continue to predict their usual price plunge of a 15% to 20% drop, but the declines I see in the future will be modest: more of a slip than a plunge. In November we saw a median resale home price of $121,548, down from October’s $123,000, and I expect this number to soften only slightly over the next two to three months.
Peering into 2011
As always, to end on a positive note, let’s give the first look into 2011 to Frank Nothaft, the Chief Economist for Freddie Mac who sees a gradual recovery of the housing and mortgage markets in 2011.
According to Frank Nothaft, the five features that will likely characterize the housing and mortgage markets for next year are low mortgage rates, house-price recovery, homebuyer affordability, fewer mortgage originations, and lower delinquency rates. In Arizona, we can throw in great weather, can’t we?
Contact Tom Ruff at The Information Market.
Tom is a graduate of the University of Nebraska. He founded "The Information Store" in 1982 and quickly became known as “The Source” of publicly recorded real estate data in Maricopa County. In August 2005 he formed "The Information Market" specializing in foreclosure data and housing studies.
Mr. Ruff is an expert on publicly recorded data and is known for his monthly housing opinion which shares an inside and sometimes irreverent look at the Phoenix Housing Market. He is often quoted in local and national publications.