Bay Area Notices of Default (NODs) increased 44% on a year-over-year basis in the third quarter of 2008, up 40% in San Francisco proper (from 252 to 353). And while the number of new NODs in San Francisco fell 15% from the second quarter, do keep in mind that a new state law took effect in September that can add 30 days to the lead time for a lender to file a notice.
At the same time, actual Bay Area foreclosures rose 273% (from 3,242 to 12,093) with Contra Costa (up 216% to 3,662), Alameda (up 274% to 2,521) and Santa Clara (up 428% to 2,165) leading the way. Recorded foreclosures in San Francisco totaled 192, up 191% on a year-over-year basis and up 36% (51 homes) from the second quarter 2008.
Most of the loans that went into default last quarter were originated between October 2005 and February 2007. The median age was 28 months, up from 18 months a year earlier.
In other words and once again, we’re moving from those who were simply undercapitalized to begin with, to those who had more of a cushion in the bank.
∙ California mortgage default filings drop amid procedural change [DataQuick]
∙ Actual Bay Area Foreclosures Up 314% (San Francisco Up 182%) [SocketSite]
What is the rationale for evaluating NODs and foreclosures on an YoY basis, rather than versus the previous quarter?
That suggests an assumption of seasonality in these numbers that I don’t understand.
It’s just a trend line and its trending in only one direction. UP
What’s interesting is the world has changed drastically since about Oct 1 2008, and none of this data (even the NOD stuff) reflects that
yet.
[Editor’s Note: Bingo.]
Wow, the one foreclosure in my ‘hood might become two, or perhaps even three, next quarter. So my neighbor must have made a silly choice in buying that $300k car last week (murcielago…I approve).
“Every foreclosure cuts the value of all surrounding homes by a total of about $220,000 as it stigmatizes the area and sells at a discounted price, according to the Federal Deposit Insurance Corp.”
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ahE9ALO_cRyA
you better hope for just one.
@ anon at October 23, 2008 3:01 PM … And how many homes for sale in your neighborhood are competing against those three foreclosures for fewer and fewer buyers with fewer and fewer dollars to spend?
Wow, the one foreclosure in my ‘hood might become two, or perhaps even three, next quarter. So my neighbor must have made a silly choice in buying that $300k car last week (murcielago…I approve).
I’m confused. is it the same neighbor that bought a $300k murcielago that got foreclosed upon? or is that a different neighbor? or are you just trying to impress us with your neigbhor’s large genitalia? (murcielago, yuck).
Regardless, I would hardly call foreclosures in neighborhoods where people buy $300k cars a good thing.
I find it interesting that for the longest time foreclosures in worthless “flyover land” had nothing to do with California, then foreclosures in California had nothing to do with the Bay Area. Then Foreclosures in the Bay Area had nothing to do with San Francisco. Then foreclosures in San Francisco had nothing to do with “the real” San Francisco. Then Foreclosures in the “real” SF had nothing to do with “my neighborhood”. And now foreclosures in your neighborhood have nothing to do with your other neighbor
If current market trends continue we may see more homeless people with $300k cars they can’t sell (or won’t sell at depreciated price). This morning the futures markets (Dow/SP) hit their down limit and aren’t even trading. I’m sure markets down 40%+, untradable markets, horrific earnings and guidance, possible insolvency of various countries (iceland, Eastern Bloc, Argentina), sky high foreclosures, and recession etc will improve property values for your neighbor?
“This morning the futures markets (Dow/SP) hit their down limit and aren’t even trading. I’m sure markets down 40%+, untradable markets, horrific earnings and guidance…”
1/3 of my money is highly diversified mutual funds while the other 2/3 is equally divided between FDIC insured CD’s and real estate. Liquidate the equity portion or too late? Sure would like to hear what others are doing.
chuckie, it’s to late to move into an all cash position, your just going to lock in your losses.
Your best bet is to take a dollar cost averaging position and take advantage of these lows and ride the tide back up in ’09.
Right now is probably the wrong time to dump all equities. There is always the risk of a -20-30% crash now, but it is more likely that the markets bounce, in view of the deeply oversold nature of the slow motion “crash”, VIX, impending election, unprecedented attempts to moderate the decline, etc.
Use any medium term rally, however, to lighten exposure. US equities will go nowhere for another 10 years at least, and we almost certainly have not seen the ultimate lows (which maybe around 4000 on the Dow, 400-500 on the S&P). Real estate in places like SF will fare even worse, and prices will likely be lower in 10-15 years than they are today. Welcome to the Kondratieff Winter. The markets want a Depression and they will get it.
chuckie:
I honestly don’t have any idea what anybody should do. these are not normal times.
it seems like every few days we get a new Fed action or a new govt rule or a new stimulus or a new ban on something etc. The rules change so fast that nobody knows what to do.
I wrote a long post, but it turned out too negative so here’s a revision
1) make sure you have an Emergency Fund. I’d suggest 6-12 months of cash or cash equivalent holdings (CD, Treasurys, Savings account, etc)
2) I would have at least some CASH (actual currency) on hand. Bank failures are not out of the question
3) this is not the time for any large purchase. including car, house, etc.
4) save like crazy.
5) reduce your expenses.
as for how to invest your egg… I cannot say. I’ve said this before but the outcome will be driven by just a very few people. Dangerous. Also, the markets are literally broken right now. Treasuries are failing to deliver at a record pace (terrifying), and the 30 year swap rate turned negative (which should be impossible). Banks are refusing other bank’s line of credit. Even in bad markets this stuff isn’t supposed to happen. We aren’t in a bad market, we are in a BROKEN market.
My 401k is 100% in a Treasury Money Market
My IRA is 50% Treasuries and 50% CEF (Gold/Silver fund)
I have one oil ETF (that I’m way underwater on…) haven’t decided what to do with it.
My entire taxable investment money is in cash. 95% of that is spread between 6 different banks and Treasurydirect.gov.
5% is in my mattress.
I am taking enormous inflation risk with my portfolio right now. Unbelievably, I may be taking risk that my Treasuries in my 401k and IRA are “fake”. But I am no longer worried about return on capital. I’m worried about return OF capital. I’m young so don’t have a lot of wealth and I have a lot of people who rely on me, so I can’t gamble.
if we’re lucky, everything will settle down and this will be the “bottom”. but it is still possible that we’ll see a major crash.
ex SF-er, you are too funny. made me laugh. I like your saying of return on capital vs return of capital.
I am losing that return of capital now, for over $150K so far this year.
Ex SF-er writes: “I’m young so don’t have a lot of wealth.” Same here (well, youngish). Here’s one way to look at it. Assuming the whole system doesn’t crash and burn for 20 years, and we return to some sort of normally functioning market and economy, those of us who are savers should come out ahead from all this even after losing a chunk in this crash. We’re now able to buy up stocks/homes/assets/etc. for far less going forward. The results of compounding are dramatically improved when you start from a low basis. I don’t know if it is time to start buying yet (certainly not real estate, probably not stocks), but when things smooth out we will be better off financially from all this turmoil.
I do feel bad for those who are retired or about to be. There is literally no time to recover for a significant number.
lmrim, ex SFer, bdb others who answered my query above the last time; I am hoping for your thoughts again.
1/3 of my money is highly diversified mutual funds while the other 2/3 is equally divided between FDIC insured CD’s and real estate.
We’re seeing a bit of a rally in the stock market but I am feeling that the lows of 6500-7000 will be tested again. The question I am trying to answer is this – Sit tight or go to cash and hope to get back in at let’s say 7000?
chuckie,
I’ll tell you what I’m thinking right now (with all caveats, of course).
IMO US equities are not a great bet long term even at these levels. Some exposure is warranted (because we’ve had succesive 50%+ drops in 10 years, and so snapbacks can be larger than people imagine), but not too much. From a trading perspective, I’d wait for a pullback from these levels (don’t really have a specific level in mind – it’s going to be more of a function of time, in that it will take a fair amount of time to heal the damage that was done). If you feel that you are light in exposure and are happy with how the last 18 months have worked out investment-wise, I’d start averaging in on a mechanical basis (monthly, or quarterly), with an eye towards progressively getting to whatever full exposure that you want (and I’d say no more than 20% net worth) 18-24 months from now.
I’ve been buying Asian equity indices (again, partially mechanically) since late last year as a structural position, again mechanically. I will probably have more net worth in Asian equities than US equities 2 years from now.
I like US corporate bond exposure, and would overweight junk bond exposure. I’ve been buying junk since late last year. I’d look at the junk exposure as partially replacing US equity exposure, so if you go the junk route, reduce equity buying a bit.
I’m not buying any muni debt, and have dramatically scaled back exposure to the long end of the treasuries curve (from a large overweight that you probably recall from my rantings in early 2008). I don’t think there is a huge near-term inflation risk, and I would get back into far dated treasuries on a near term significant pullback (say, if the 10Y went over 4%), but right now it is just not a compelling risk/reward imho.
I don’t have any structural long commodity exposure (except for an “insurance” position in gold), but I am inclined to trade it from the long side when I get bored.
I hope all that helps. My advice on existing real estate is to get as much cash out as possible and into bankruptcy remote vehicles b/c of the risk of binary outcome (total wipeout scenario versus “muddle through”).
LMRiM, I was wondering — which asian countries are you buying now, and what is your thesis for Japan/China/India?
On another note, I don’t understand why the market is climbing as much as it is — on declining volume, with the worst stocks outperforming the best. It seems like alice-in-wonderland territory.
This is proof that America did everything wrong, building cars, houses, & small buildings. NOW we can see we should have ended the wage & let Socialists build only 100-story TOWER CITIES connected to maglev Trains, by working part-time 10 hrs a week. That would be possible only when all people on earth own all things, because Capitalism is slavery of the masses to make a few MASTERS rich. WE must CHANGE!