By gitano @ 12:

Looks like limiting supply! Thx for the great article Indy

It’s not limitied supply due to some huge demand for homes. It’s limited ( though far from low ) due to that sellers are still thinking that the dip in prices is just a blip and that values will soon shoot up in bubble style to the level they want to sell at. Many still live in the bubble and can’t accept that there home is not worth and will not be worth what they want to sell it for and thereby they keep it off the market in a futile hope for a quick and large price appreciation. I think they are shooting themselves in the foot and that for many it will endup in tears. This bubble will not re-inflate quickly.

Indy – great article. I’ve been looking exclusively at foreclosed properties, and now it makes sense why the ratio of shorts to foreclosed is so high, and increasing.

patient – This is the exact situation our landlords are in. They bought two properties at peak prices, and want to sell the one we’re in, but only at peak prices. They think they can tart it up with some landscaping, kick us out (we are covering their mortgage – it’s not like this is even in a negative cash-flow situation yet) and finally get rid of it in the spring. For a profit.

I predict that:
a) They will not be able to find renters willing to pay the price we are now, not in Renton anyway.
b) They will lose the house, ultimately.

Quite frankly, I think they are insane. Ostrich: meet sand.

I’m hearing from my friends in servicing that there’s just a huge problem with people calling in asking for a loan mod that flat out don’t qualify. For example, they have NO job (not going to get a loan mod with no income) or they would otherwise qualify for a traditional refi! Today I heard of one guy asking for a loan mod because he wanted to avoid paying the closing costs associated with a refi. Meanwhile there are real people hurting out there waiting for an answer from loan servicing.

I almost agree with David and think they shouldn’t even be occurring. If the NWMLS forced them to go FSBO unless the bank pre-approved the list price, I certainly wouldn’t think that would be a bad thing. Anything to change the way these things are handled today would be good.

By patient @ 21:

RE: Kary L. Krismer @ 19 –
You need to look at 2009 as a whole. I think the accumulated pendings are several thousands ahead of accumulated closings. If it’s mainly a delay introduced in 2009 the closings should grow and overtake pendings, if August now shows lower closings than july it seems unlikely that this will happen and that there are no several thousands of sales backlog pending to close ( that actually will close ).

There’s no backlog of pendings. There’s a ton of pending short sales that will never close and pendings that have failed inspection or financing contingencies.

First, I wasn’t the quote there.

Second, I’d agree there is no backlog, although it’s mainly short sales. Inspections and financing aren’t any bigger issues than in the past, that I’m aware of.

No condos.

Is that all properties or just single family (ex condos)?

RE: DrShort @ 22 – DR., do you have stats on that comment?

For King County SFH, there’s been 13,130 pendings and 8001 closed sales Jan though July. That’s a difference of 5,100 pendings. I bet there are less than 2500 SFH in pending status right now. Someone with MLS access could answer that for certain.

Now a lot of people are walking away and there are short sales being done that are contrary to past procedures. The problem is that the investors are out the money. The money is still in the economy, but the people who invested are taking a loss. In most cases after the Notes have been traded at a discount, and some money collected, the losses are pretty tame and that’s why they do it.

A second problem are the people who are buying the short sales. Many “investors” are buying into other people’s problems. Many home buyers are thrilled to get a 20% discount plus the tax credit and they are signing up for more mortgages from the same banks that are taking the losses.

It’s all good. The mortgage mill is churning again and the buyers are giving the gift of cash as a down payment. These are the good crop of buyers.

Now what if prices decline this year? What if those new investors and buyers lose another 20% in home value?

In my opinion you don’t want to see short sales. You want the foreclosure process to be the only recourse the bank has. There needs to be a quick and definitive market shift. The sooner this is over the better.

It looks like the closings could be a few hundred lower than July based on warranty deeds.

In any case, would this be alarming? If you look at the August v. July closings since 2000, there is really no trend.

RE: Kary L. Krismer @ 19 –
You need to look at 2009 as a whole. I think the accumulated pendings are several thousands ahead of accumulated closings. If it’s mainly a delay introduced in 2009 the closings should grow and overtake pendings, if August now shows lower closings than july it seems unlikely that this will happen and that there are no several thousands of sales backlog pending to close ( that actually will close ).

There’s no backlog of pendings. There’s a ton of pending short sales that will never close and pendings that have failed inspection or financing contingencies.

This strategy will back-fire big time. Banks assume that both home values and their balance sheets will be stronger in a year or two. That’s a mistake. Thanks to continued rising unemployment, wage reductions and/or under-employment, etc. the consumer is making very little progress toward reducing their existing debt load. As the economy continues it’s downward spiral personal finances will deteriorate even further. The bank’s hope of selling REO, etc. to a stronger consumer are unlikely to meet with success. Wait, wait, wait for those gems.

http://your.kingcounty.gov/assessor/download/download.asp

You should be able to publish your own housing stats (median, average, etc.) on a weekly or even daily basis. I’d take a bit of work, and I’m not sure of the ultimate value, but it could be done.

Looks like limiting supply! Thx for the great article Indy

It’s not limitied supply due to some huge demand for homes. It’s limited ( though far from low ) due to that sellers are still thinking that the dip in prices is just a blip and that values will soon shoot up in bubble style to the level they want to sell at. Many still live in the bubble and can’t accept that there home is not worth and will not be worth what they want to sell it for and thereby they keep it off the market in a futile hope for a quick and large price appreciation. I think they are shooting themselves in the foot and that for many it will endup in tears. This bubble will not re-inflate quickly.

Where are all the sellers trying to cash in on the $8000 1st time buyer tax credit before it expires?

My thoughts are in-sync with many of the bloggers; what 1st time home buyers?

Hades, I don’t know how middle household incomes in Seattle can possibly afford the insane rents; let alone buy a house. This market is doomed, without massive monthly payment decreases for 1st time home buyers and an $8000 tax credit on even a $200-300K house/condo is a complete joke.

… industry data and anecdotal evidence suggest banks and servicers have been dragging out the process-not rushing to kick people out of their homes
… banks and mortgage investors want to avoid repossessing hundreds of thousands of homes, which would produce losses and hits to capital.

“The goal is to hold off on foreclosures and take losses as slowly as possible to keep balance sheets up,” said Deborah Voelz, … “Everyone is looking at what the ultimate loss is going to be and whether it makes sense to hold off another year or two and mitigate the results.”

The foreclosure process — and it is a process — now takes, on average, 18 months to two years, up from 15 months a year ago…

and

Banks also “are allowing borrowers to be delinquent for longer and longer periods of time before initiating foreclosures,” Sharga said.

…”There are borrowers who are six or eight months in default; they may have exhausted their workout options; but they’re put on a forbearance plan because it’s an interim to a final resolution, which is foreclosure,” he said. “Banks don’t want to take the losses now.”

Deferring foreclosures could have bottom-line benefits, experts say. With fewer foreclosed properties hitting the market, housing prices have rebounded slightly. Moreover, properties might recover more of their value later on, so by waiting, banks may be able to cut their ultimate losses.

“Everybody is waiting to see what the market is going to do from a property price perspective,” Voelz said. “At some point, they have to liquidate these assets.”

and finally

How banks account for delinquent mortgages is the subject of ongoing debate among regulators, bankers and auditors.

… “Banks are believed to be carrying a lot of loans at accounting levels well above their true market value,” he said. “But once a property goes into foreclosure, their options have disappeared.”

Timothy Ward, the deputy director of the Office of Thrift Supervision, went so far as to send a letter to chief executives in May reminding them that banks must account for losses when a loan is 180 days or more past due.

Charging off loans “only at foreclosure or when deemed uncollectible” is considered “weak” and not in accord with generally accepted accounting principles, Ward reminded bankers.

“This is the challenge the big banks have,” …. “They’re supposed to take the loss at 180 days, but the initial chargeoffs aren’t that much and then we’re seeing big REO losses”

… “No one is encouraging banks to quickly book $75 million in losses and then take the heat for it, since they wouldn’t have a job for very long,” he said. …

… despite the high redefault rate on modified loans, banks now see an advantage in modifying instead of foreclosing “because it cures the delinquency and they may get par value out of the loan, if property values are stable. Even if they get [only] a few payments, if property values go up, they could do a bit better once they take out the borrower.”

The flip side is: “The more foreclosures there are, the worse the losses become down the road,” he said.

Though deferring foreclosures may help bridge a period of depressed revenues, losses still must be tallied eventually, said Cannon of Keefe Bruyette.

“One of the oldest lines in banking is ‘the first loss is the best loss,’” he said. “That’s what most lenders believe, but the question is, are they abiding by their own rule?”…

I am curious to see if the bar was moved in belltown.

**3 months?** This one that we closed today took 8 months. 3 months would have been a dream. But, the joy of it was the Buyer lived in the home the ENTIRE time for FREE!

Don’t underestimate short sales. They can be a true GEM as well but you must be patient and just keep looking while waiting. If the home is vacant all-the-better! We are 3-3 in requesting Buyers to reside in residence post CLOP.

**SHORT SALE** The MOST POPULAR 2 WORDS of the next 5+ years in real estate.

Three months for each response from the bank? I’d rather wait for the foreclosures; those are more salable.

Kary…hate to break it to you. Prices are going to continue to fall further. Buyers need to “make their offers accordingly. ” However, I will say it again. Don’t fight the FED! I’m amazed they have kept us afloat this long………maybe 6 months or 6 years but we are in for a serious dip again……….

Its all coming back and Buyers will be able to find some outstanding GEMS in the coming decade.

Heres one if you can get it for 80k!

Watch out for that 1st step.

http://www.500realtyinc.idxco.com/idx/2338/details.php?idxID=041&listingID=29043798

If the banks don’t start processing short sales, there won’t be many sales if prices fall dramatically further.

1. Apparently the deed of trust delay in foreclosing only applies to certain vintages of deeds of trust, which is presumably why we’re seeing any NOTS documents.

I assume you’re referring to the fact that the new foreclosure law that added 30 days of red tape is only applicable to mortgages minted from 2003 through the end of 2007? It’s also worth mentioning that it only applies to owner-occupied homes.

In the confidential agent only remarks it says “SHORT SALE..HOME SOLD AS IS…..Make Offer Accordingly.”

Do you know how often I see this same scenario? Sellers are starting to get it…………….They try and try. When they give up attempting to preserve some equity.BAMMMMMMMMMMMMMMM SHORT SALE!

We will see this repeated for a very long time. Sellers don’t have the cash and they WILL NOT have the cash to close for many many years! Not to mention pay the 6% to Agents, 2% in Excise Tax, Title, Escrow, and inspection repairs……………

**SHORT SALE** The MOST POPULAR 2 WORDS of the next 5+ years in real estate.

1. Apparently the deed of trust delay in foreclosing only applies to certain vintages of deeds of trust, which is presumably why we’re seeing any NOTS documents.

2. A few trustee deeds may be other types of trustees, such as bankruptcy trustees, but those are very rare.

3. There are a few agents doing short sales that don’t take listings pending when the seller gets what they consider an acceptable offer, but instead wait for the bank to accept the offer. I suspect this is a rather small number, but I don’t have any way to get a feel for it. I touched on that several weeks ago here: http://blog.seattlepi.com/realestate/archives/173118.asp It’s an incredibly stupid practice for several reasons, but the NWMLS isn’t cracking down on it.