Thursday, October 18, 2012

Short Sales Speed Ahead Causing 5-Year Low in Foreclosure Activity

A stronger economy and housing market and an increase in short sales brought foreclosure activity in California down to the lowest level since 2007, according to a report from San Diego-based DataQuick.
The number of residential properties entering the foreclosure process, or that received a Notice of Default (NoD), totaled 49,026 in the third quarter of this year, down from 10.2 percent and a steep 31.2 percent drop from the 2011 third quarter, DataQuick revealed.
The most recently quarterly figure is the lowest since the first quarter of 2007, when 46,760 NoDs were recorded. NoDs reached a high of 135,431 in the first quarter of 2009.
Short sales in California were up, accounting for 26 percent of resale activity in the third quarter, up from 24 percent in the previous quarter and 22.9 a year ago.
“[D]uring the past year, we’ve seen short sales overtake the foreclosure process as the procedure of choice to deal with homeowner distress. That may change after New Year’s because the temporary ‘debt forgiveness’ feature in the tax code is set to expire as part of the so-called ‘fiscal cliff’,” explained John Walsh, DataQuick president.
Foreclosure resales were down in the third quarter, accounting for 20 percent of all resale activity in the state. In the second quarter of this year, foreclosure resales accounted for 27.8 percent of all resale activity and 34.2 percent a year ago. At its peak, foreclosure resales reached 57.8 percent in the first quarter of 2009.

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2013 is the Year of Short Sales!

Even though the number of foreclosure filings has risen dramatically in recent months in some parts of the country—specifically in judicial states—the ratings agency DBRS expects total foreclosure filings to show evidence of a steady decline in 2013 when compared to 2012.
This is due to “the record number of servicers that are using short sales as their primary loss mitigation tool to prevent delinquent loans from entering foreclosure,” the agency’s analysts said in a research note issued Monday.
The Office of the Comptroller of the Currency (OCC) found evidence of such a shift as early as 2012’s first quarter. With the release of its Q1 mortgage performance report, the federal regulator noted that the number of home retention actions implemented over the January-to-March timeframe was down 36.7 percent from a year earlier, while the number of short sales increased 19.7 percent. 
New short sale actions completed during the first quarter of this year totaled 59,996, according to the OCC’s latest report covering about 60 percent of all first-lien mortgages in the United States. Over the second-quarter period, another 63,403 short sale actions were completed by the 60-percent subject population. 
While it will be another two-and-a-half months before theOCC releases its third-quarter mortgage performance data and mitigation numbers, anecdotal evidence from those in the field suggests the increase in short sales is likely to carry forward.  
Rudimentary projections based on the quarter-to-quarter increase seen earlier this year would mean another 138,000 completed short sales during the second half of 2012 among the 60-percent first-lien population analyzed by the OCC.
DBRS believes short sales will be an effective loss mitigation tool for curbing the industry’s shadow inventory backlog of unsold REO properties. Short sales are an effective way to get the home sold without having to incur the cost of foreclosure, preparing the home for sale, paying a listing agent, and maintaining the property, therefore lowering loss severity, the agency’s analysts noted.
As a result, DBRS expects short sales to be one of the key loss mitigation techniques used in 2013 with more servicers delegating or automating their acceptance and counter offer process in order to be more responsive to short sale bids on properties.
If you have any comments or questions about short sales, please email Anna Mikaelyan at or visit her website at 

California's Median Home Price at Four-Year High!

If you're still wondering if you should keep waiting for more price drops, wonder again!  
Interest rates are at an all-time LOW!  
According to Warren Buffet, investing into Single Family Homes is the smartest decisions Americans could make right now for their future.
The California Association of Realtors (C.A.R.) continued to report a shortage of inventory in September, which is limiting home sales but seems to be pushing up median home prices.
According to C.A.R., the median home price in California is now at the highest level in more than four years.
The statewide median price of an existing, single-family home reached $345,000 in September, up 0.3 percent from August’s $343,820 median price. The gain was also a 19.5 percent increase from September 2011, the highest yearly gain since May 2010 and the biggest gain overall since August 2008, when the median price was $352,730. For seven straight months now, prices have been increasing monthly and yearly.
Sales, on the other hand, fell in September, sinking 5.2 percent from a revised 510,910 in August and declined 1.2 percent from a revised 490,280 a year ago.
“Sales in the inland and coastal markets continue to move in different directions. Low inventory – especially in distressed areas – is dampening sales activity,” said C.A.R. President LeFrancis Arnold.
LeFrancis added, “The Inland Empire and the Central Valley have experienced double-digit sales declines compared with last year. Meanwhile, sales were higher in San Diego and most Bay Area counties, where the economies appear to be growing faster than the rest of the state.”
Housing inventory in September increased, but still stayed below the norm of a six- to seven-month supply. The Unsold Inventory Index for existing, single-family homes stood at 3.7 months in September, up from a revised 3.2 months in August and 5.3 months in a year ago, according to C.A.R.
“For the state, at 3.7 months of supply, unsold inventory is still less than half what it would be in a normal market,” said C.A.R. VP and chief economist Leslie Appleton-Young. 
Appleton-Young continued, explaining that a constrained supply at the moderate and lower end of the market has led to a nearly 28 percent drop in sales of homes priced under $200,000 and a more than 15 percent drop in sales for homes priced between $200,000 and $300,000. 
However, Appleton-Young said homes in the upper price range, where inventory isn’t as much of an issue, saw increases. “[S]ales of homes priced $400,000-$500,000 rose more than 14 percent, and those priced above $500,000 increased more than 15 percent,” she noted.

If you have any comments or questions about short sales, please email Anna Mikaelyan at or visit her website at