Time for our June update on Foreclosure activity in King, Snohomish, and Pierce counties. First up, the Notice of Trustee Sale summary:
June 2009
King: 1,615 NTS, up 180% YOY
Snohomish: 817 NTS, up 190% YOY
Pierce: 1,050 NTS, up 144% YOY
Yow. What opened the floodgates in June? 144% to 190% increases YOY? Yikes!
[Update]
Kary points out in the comments that the massive May to June spike may be due to a new state law that was passed by the legislature and signed by Gregoire at the end of April. The bill—Senate Bill 5810 (pdf)—essentially adds a bunch of additional red tape for lenders foreclosing on owner-occupied residential property with mortgages minted from 2003 through the end of 2007. In a nutshell, it requires lenders to make a good faith effort to contact borrowers by mail and telephone to notify them of the housing counseling options available to borrowers in foreclosure before they are allowed to file a notice of default (which comes before a notice of trustee sale).
[End of Update]
Here’s a simple look at how June’s foreclosures compare to the same month last year in each of the three counties:
To give the numbers some more context, here’s a comparison of June closed sales reported by the NWMLS and June notices of trustee sale:
Next let’s look at the percentage of households that received a Notice of Trustee Sale (based on household data for each county from the American Community Survey, assuming linear household growth between surveys):
King County came in at 1 NTS per 486 households, Snohomish County had 1 NTS per 322 households, and Pierce had 1 NTS for every 286 households (higher is better).
According to foreclosure tracking company RealtyTrac, Washington’s statewide foreclosure rate of one foreclosure for every 138 households was 17th worst among the 50 states and the District of Columbia (up from 18th last month). However, this was still better than the national average of 84 households per foreclosure. Note that RealtyTrac’s definition of “in foreclosure” is much broader than what we are using.
There are many possible outcomes once a notice of trustee sale is filed. The borrower could get the lender to agree to a short sale, the borrower could “turn in the keys” via a “deed in lieu of foreclosure,” or the trustee sale could take place, theoretically resulting in the filing of a “trustee deed.” Unfortunately it’s a complex process that does not lend itself well to simple analysis.
However, in an attempt to better understand what is going on, let’s look at another new chart. In the chart below, I have plotted the number of “Discontinuance of Trustee Sale” documents filed in King County each month. Theoretically, according to RCW 61.24.090, a discontinuance of trustee sale is supposed to be filed if the borrower catches up on their payments and the foreclosure is canceled:
(6) If the default is cured and the obligation and the deed of trust reinstated in the manner provided, the trustee shall properly execute, acknowledge, and cause to be recorded a notice of discontinuance of trustee’s sale under that deed of trust.
In reality many lenders do not file this notice, but if we look at historic percentages we may be able to learn something.
Pre-boom from 2000 through 2002, the number of discontinuances filed was 31% of the number of notices of trustee sales filed. During the boom from 2003 through 2006, that number bumped up to 45%, most likely because rapidly rising home prices made it much easier to simply sell when in danger of foreclosure. In 2007, it dropped slightly to 39%, in 2008 it was 29%—still just slightly below the pre-boom average. In the first half of 2009, the number of discontinuances filed was only 17% of the number of trustee sale notices.
Following are the usual charts of King, Pierce, and Snohomish County foreclosures from January 2000 through June 2009. Click below to continue…
The number of King County homes in foreclosure shot up to 48% higher than its previous record of 1,089 set in March.
Snohomish County also shot up to a stunning 60% higher than the record set just a month earlier in May.
Same story in Pierce County, which registered a 45% month-to-month increase.
So much for the rates of increase tapering off like they were last month. Here’s one last chart to give you some longer-term context for the latest figures:
Yikes.
Note: The graphs above are derived from monthly Notice of Trustee Sale counts gathered at King, Snohomish, and Pierce County records. For a longer-term picture of King County foreclosures back to 1979, refer to the final chart in this post. For the full legal definition of what a Notice of Trustee Sale is and how it fits into the foreclosure process, check out RCW 61.24.040. The short version is that it is the notice sent to delinquent borrowers that their home will be repossessed in 90 days.
Tip of iceberg….
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(: .sǝsnoɥ ɹıǝɥʇ ɥʇıʍ uʍop ǝpısdn ǝɹɐ ǝ1doǝd ɟo ʇo1 ɐ ǝʞı1 sʞoo1 ʇı
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RE: uʍop ǝpısdn @ 2 – Comment of the week! :^)
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(: .sı ʇı ‘sǝʎ
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RE: uʍop ǝpısdn @ 2 –
Master of the not so obvious!
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Hey tim – I notice you use NTS in the text but NOTS in at least one of the charts. Assume thease mean the same thing?
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Yow. What opened the floodgates in June? 144% to 190% increases YOY? Yikes!
Well, let me think here………..hmmm….Could it be COMMON SENSE opened the flood gates?
People will not stay in these upside down homes. Forget Loan Mod.. BRING on the Cram Down or this will spike higher and higher…
I will say it again……….People are NOT stupid. Short sales will continue to spike higher and higher because our mobile society dictates that we must move. At the first sign of a job change, divorce, illness, or even simple life stresses people will seek the route that will be the easiest.
Homeowners now have something they can blame this decision on ** Greenspan Put, 911, Mortage fraud in lending, etc. The decision to foreclose has become socially acceptable and that will lead to numbers of filings that will continue to astound the masses.
People are asking “Why” they should stay in their home and this is TOXIC!
They are all coming back! Not a question of if……………….just when……..
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RE: Ray Pepper @ 7 –
I can also see some sort of federal program starting for people that have ruined credit from walking away thus making it easy for them to get back in the game.
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It would be interesting to know if this behavior consistent with other markets that have reached this point in value loss from the peak. did they also show a spike in FC activity at about the same point?
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RE: deejayoh @ 6 – Yeah, whoops. They’re both referring to the count of Notices of Trustee Sale. I’ve updated the chart that erroneously used “NOTs.”
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I wonder if RAL could use that method to get past the filter…
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I have been wondering where all of the foreclosures were.
Last weekend I drove through a new housing development in a small town in SW washington to see how far the prices had come down. I remember 2 years ago looking in disbelief at the prices tags of 450-650k on homes in a small town with no jobs and a 35 minute commute to Portland, which is where most of them work.
Two years later, 1/15 houses (my rough count) are for sale for about 60-70% of the original price, and another 1/15 appear to be abandoned (no cars, vegetation all dead), but no for sale sign at all.
Sometimes I am tempted to start shopping for a home now, mostly because I wonder if a lot of these home built in the past few years have fallen below replacement cost already?
Magnolia44 commented the other day about how there isn’t much “new” news here. I think the real interesting story to come out of this is what a sustainable real estate model will look like going forward.
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When will realtors go from saying “Foot traffic at open houses is up!” to saying “Foot traffic at auction houses is up!” to justify their bottom calls?
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RE: Acerun @ 8 –
GUARANTEED MY FRIEND!
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This is news and it is showing how people are deciding to walk away. The sad thing is we are being lied to and manipulated daily, the banks are holding back on us and trying to bleed this thing slowly.
Anyway still employed, for now and business as usual. All projects and any large purchases in my household are suspended until 2010 review, that makes the wife laugh but its true.
I didn’t mention that baby Mags has joined the world as our first. Its been a few months but what a whirl wind and added pressure, but a true blessing all in one.
Good luck to all of us in these times that’s for sure.
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Speaking of the banks, these foreclosures are happening even with banks trying for the most part to prevent them.
I know people in banking in CA who talk of people with million dollar home portfolios being given 2% or so rates for 5 years to prevent them from walking, there are other types of mods occuring. These are people who made money speculating, and the banks in some cases are doing whatever they can.
Tough for us average joes, who pay the bills. We will see if Ray Pepper’s theory holds true but at this rate it is going to take a while for that desperation to kick in. Markets are pulling the wool over everyone, for now.
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By Magnolia44 @ 15:
Congrats!
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” In the first half of 2009, the number of discontinuances filed was only 17% of the number of trustee sale notices.”
Can we read this as that the whole government sponsored refi spectacle is not very tempting when you are under water or do not apply to our several hundred thousands dollar homes bought with zero down i/o/teaser loans…
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As I’ve mentioned before, the law is changing on what they need to do to foreclose non-judicially. They’re probably trying to squeeze as many in under the old law as they can. Typically they wait a bit longer than they have to, but this would easily change that practice.
I think the new law kicks in about July 26th or so. We’ll see what the numbers are for August.
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They don’t always file a notice of discontinuance. That’s a less reliable indicator than pending! ;-)
Seriously, I’m not even sure they do it half the time.
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RE: Kary L. Krismer @ 20 – Quoting from the post:
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RE: Ray Pepper @ 7 –
HI RAY
IMO the foreclosure dam has been building up, due to early year government and bank practices to delay implementation, to work out possible refinancing and short sale options. The delays were apparently a moot point.
Another fly in the ointment; they say household incomes are rising, but they won’t tell us how much per household population is rising too. IMO, there are significantly more incomes living in a household today, because there’s more people living in each household lot/unit today….it was on KING TV a couple days ago about many $425/mo rooms packed on one tiny city lot building [140 sf rooms each]…where do they park and the neighbors are horrified too?
http://www.seatoskyrentals.com/site/Overview/PropertyID__21118/748/default.aspx
All this packing together just adds to the foreclosure fire. And if you’re looking for more fire gas population as the answer, wellllllll…..that would only work if we drastically plummet home prices as wages plummet with more competition in a dwindling job base [Obama says part of the lost jobs aren't coming back either]. More foreclosures then too.
Don’t look for the federal government to print money out the problem soon either, that causes inflation and mortgage rates to rise [can't have that]….we’re between a rock and the hard place IMO….
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Those who want to see what the new law requires: http://apps.leg.wa.gov/documents/billdocs/2009-10/Pdf/Bills/Senate%20Passed%20Legislature/5810.PL.pdf
Pay particular attention to Section 2. It will be obvious why they want to beat this going into effect.
This is very similar to some legislation that the Governor proposed. I thought it never passed, but apparently something parallel did.
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RE: Magnolia44 @ 16 –
Shame on you for overpopulating the world like that! :) Congrats, man. What a blessing. That makes all this other stuff seem like a bunch of fluff.
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RE: Magnolia44 @ 15 –
Congrats on baby Mags. Life changing as you can’t even imagine.
I also heard about banks sitting on properties not to flood the market and put even more pressure on the properties they already have out.
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RE: Kary L. Krismer @ 19 –
I think that pretty much nails it. After around July 26th, it will be more cumbersome for lenders to non judicially foreclose. They want to get in under the wire, hence the vastly increased numbers for NTS.
Without this change in law, NTS numbers might still be up, but not by nearly as many.
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There might also be an effect of past moratoriums compounding things. That’s pretty interesting if you think about it. The feds require a moratorium, and while that’s in effect the state is passing a law making it harder to foreclose.
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By Tyler @ 12:
Replacement cost is only relevant if building a particular home in a particular area still makes sense. Some of these 10,000 sq ft homes on the exurban fringe would never make sense to build today, regardless of what the replacement cost is. Likewise with homes in really run down areas. Replacement cost doesn’t factor in to whether someone would actually want to live there.
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There was over 12 pages of NTS in the Everett Herald yesterday. That might be the most I’ve seen.
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The more I read about state and federal government making it tougher to foreclose, the more po-ed I get. I should have bought a mansion (hell, why not 2 or 3) and filled it with plasmas on every wall, expensive furniture, clothes. My family should have taken a vacation every month with the equity.
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The NTS filings are coming in at a slower pace in July than June (1300 pace so far). What’s picked up are the actual Trustee Deeds. It’s possible July could see 500 for King County. If Trustee Deeds pick up a lot over the summer, that could make the inventory of houses on the market quite ugly come Oct – Dec.
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By The Tim @ 17:
Oooooh, sorry. The correct response would have been:
“*Crickets*”
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*crickets* is right.
Maybe my *crickets* comments were a little on the a** side.
Thanks for the well wishes from those, Tim even though I can be snide and an a** with my comments, that was pretty nice of you to step up with the congratulations.
No more smart comments from me, or at least I will try.
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By Magnolia44 @ 33:
We haven’t read any yet, so this probably won’t be much of a problem.
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By David McManus @ 30:
The part I liked about the governor’s proposal, which the more I think about it is different than what passed, is it seemingly required banks to respond better to short sale situations. I don’t have a problem with that at all–I though it clever.
But I would tend to agree about much of the rest of this new state law. Forcing the bank to call the debtor just seems extreme. Simply require certain material be mailed. There’s no reason that shouldn’t be sufficient.
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RE: Kary L. Krismer @ 23 –
OK Kary I read as much as I could. It seems as though this new law encourages lenders to make “collection calls” like they do for credit cards.
That will fix things.
Seriously it will increase foreclosures. No one, absolutely no one has to tolerate harassment from a lender. Having a crack head call you on the phone on a lender’s behalf is reason enough to walk away.
On the street it’s called harassment, and extortion by threat of harassment. Add that to swindle by device and I think you have a criminal conspiracy.
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RE: Magnolia44 @ 33 –
Your crickets comment was exactly right. I have noticed that the discussions here have degenerated to name calling. In my opinion many commenters get lambasted for differring opinions. I’m used to it, it’s a part of the charm of the site, but if some one is lurking then makes a comment they should be given some slack.
Maybe it’s the heat and maybe it’s that the selling season is over, but you made a timely comment.
Congradulations. Kids, dogs, and the house are what make the world go around for me.
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RE: David Losh @ 36 – Exactly. They’ll ignore the calls and God knows what will happen during the calls. A written communication would be much better.
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By David Losh @ 37:
Seattlelites boil at 85
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RE: Kary L. Krismer @ 38 –
This looks like more bank directed legislation. A notice is not what the banks want. Banks want the right to harrass. They don’t have that. They are regulated in the harrassment techniques that they use, but have no right to harrass.
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RE: Joel @ 32 – I doubt it will be quiet around his place for a while. If anything, thanks mag for making SWE upset by helping us overpopulate this place. I vote for SWE as group leader of the commons.
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If anything, I am surprised the foreclosure notices are as high as they are. There are so many stories coming out about lenders refusing to foreclose on delinquent homes these days, that I would expect the public foreclosure rates to stay somewhat muted.
This reluctance to follow-through with foreclosures may be why Tyler isn’t seeing the massive waves of distress sales he had been anticipating. The big question, in my mind, is just how big this “shadow” inventory (of delinquent homes which the banks refuse to foreclose on) is?
http://www.heraldtribune.com/article/20090712/ARTICLE/907121067/2055/NEWS
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RE: Sniglet @ 42 – I’m not going to speak to the Florida market, but up here the banks could sell a lot more REOs if they just did a better job marketing the things. Regular sellers discovered long ago that you needed to clean a place up a bit to put it on the market. You seldom see a bank doing that, and the last time I saw it, they were doing things to a property that wasn’t really necessary.
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RE: Kary L. Krismer @ 43 –
In my opinion the banks simply want to get through this selling season. I see staggering profits for banks this year. I don’t think banks want or need to sell foreclosures or bank owned properties.
As I see it it’s the investors who are on the hook for the money and the banks are the servicers. I’ve yet to figure out the banks incentive for selling or flooding the market with distressed homes. As long as prices are stable the banks can do their refis and people will take out purchase loans. When prices begin to decline that spigot of loans will dry up.
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RE: David Losh @ 44 – In my opinion the banks simply think they don’t have to adapt to the times because they’re banks, and never have.
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I work for a bank and believe me we are trying to short sell (and stick the borrowers with a money judgement if possible or foreclose and sell as quickly as we can. we want to dump our inventory before everyone else does. We realize that values are only going to drop and will take our refi profits to offset our portfolio losses and get through this as quick as possible.
This new law only slows us down a bit.
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RE: homer @ 46 – Homer, there are a few banks that respond fairly quickly to a short sale offer, but that’s the exception. Do you have any idea how long it takes your bank from the time an offer comes in to being able to say: Yes!
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RE: Kary L. Krismer @ 47 –
24-48 hours is our time from offer to either counter, acceptance or a “no”.
I read this blog and I am one of the few bankers who believes we are still headed down in the market. A known loss now is much better than a bigger loss later on.
Learn from the mistakes, accept them and don’t repeat them again.
I do know of some regional banks who are not foreclosing but still downgrading the asset. My opinion is that time has passed. Take them back, put them on the market and sell them as values are still headed downward.
My guess is this fall you will see a flood of inventory going on the market with these regional banks… this is when it will get ugly. I am seeing drops of $80-$100K from some of these banks on competiting properties. I can’t imagine how a regular homeowner who has to sell can compete with a bank selling an REO right now.
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“I can’t imagine how a regular homeowner who has to sell can compete with a bank selling an REO right now. ”
consumers are weird, they are not investors. Buying a REO is a lot different than buying a conventional sale. If something is wrong with the house they wont fix it and often times wont negotiate the price (with you they may lower it later.) Also to some there is a stigma attached to a foreclosure. I means that the house is a failure, somewhat like buying a used wedding ring. I know it sounds silly but many people think that way.
There are several nice foreclosures in my target area (Mukilteo) that have not sold while comparable conventional sales of similar houses have. Even though the Foreclosures are listed way less.
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By homer @ 48:
That timeframe is excellent if you’re talking short sale. REO it’s good.
As to how to compete, typically better condition, and also less concerns over the contract. Most the bank contracts I’ve seen haven’t been as bad (one-sided) as what you’d expect, but I saw one where it was just a horrible piece of junk, apparently drafted by several bank employees over many years. It would probably cost a buyer $2,000 in attorney fees to respond to the bank’s documents.
For the right buyer, REO is the way to go, especially if they have money to re-carpet and re-paint (and especially if they’re first time buyers and that money will eventually be repaid by the government).
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By Sniggy @ 49:
Again, a lot of that is condition of the property. Normal sellers have learned that they need to clean up and fix up prior to going on the market. Banks largely have not learned that. Often the properties still have junk lying around throughout the house and grounds.
But I think you’re right about the buyers simply not wanting foreclosure property. When looking at the stuff it’s sort of depressing. It almost reeks of failure–especially if you’re looking at a lot of them. And the banks’ failure to have stuff hauled away only makes that worse.
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RE: Kary L. Krismer @ 51 –
Even some of the nicer REO properties are marketed poorly. Often the listings contain only one photograph, and it’s blurry.
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RE: Ira Sacharoff @ 52 – That digital film is expensive stuff.
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[...] and Pierce County records. For a longer-term picture of King County foreclosures back to 1979, refer to the final chart in this post. For the full legal definition of what a Notice of Trustee Sale is and how it fits into the [...]
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[...] and Pierce County records. For a longer-term picture of King County foreclosures back to 1979, refer to the final chart in this post. For the full legal definition of what a Notice of Trustee Sale is and how it fits into the [...]
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[...] and Pierce County records. For a longer-term picture of King County foreclosures back to 1979, refer to the final chart in this post. For the full legal definition of what a Notice of Trustee Sale is and how it fits into the [...]
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[...] and Pierce County records. For a longer-term picture of King County foreclosures back to 1979, refer to the final chart in this post. For the full legal definition of what a Notice of Trustee Sale is and how it fits into the [...]
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[...] and Pierce County records. For a longer-term picture of King County foreclosures back to 1979, refer to the final chart in this post. For the full legal definition of what a Notice of Trustee Sale is and how it fits into the [...]
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[...] and Pierce County records. For a longer-term picture of King County foreclosures back to 1979, refer to the final chart in this post. For the full legal definition of what a Notice of Trustee Sale is and how it fits into the [...]
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[...] and Pierce County records. For a longer-term picture of King County foreclosures back to 1979, refer to the final chart in this post. For the full legal definition of what a Notice of Trustee Sale is and how it fits into the [...]
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