Foreclosures Back Off Spike, Remain Highly Elevated

Let’s expand on our preview of foreclosure activity with a more detailed look at May’s stats in King, Snohomish, and Pierce counties. First up, the Notice of Trustee Sale summary:

May 2009
King: 1,096 NTS, up 10.5% YOY
Snohomish: 593 NTS, up 16.0% YOY
Pierce: 740 NTS, up 1.9% YOY

Here’s your interactive Tableau dashboard updated with the latest foreclosure data:

Foreclosures dropped month-to-month in King and Snohomish counties, but rose slightly in Pierce. Despite the declines in King and Snohomish, the number of foreclosures remains higher than any time prior to 2010, except for the brief legislation-induced spike last summer.

The percentage of households in the chart above is determined using OFM population estimates and household sizes from the 2000 Census. King County came in at 1 NTS per 742 households, Snohomish County had 1 NTS per 453 households, and Pierce had 1 NTS for every 427 households (higher is better).

According to foreclosure tracking company RealtyTrac, Washington’s statewide foreclosure rate for May of one foreclosure for every 574 housing units was 20th worst among the 50 states and the District of Columbia (up from 24th in April and 32nd in March). Note that RealtyTrac’s definition of “in foreclosure” is much broader than what we are using, and includes Notice of Default, Lis Pendens, Notice of Trustee Sale, and Real Estate Owned.

Hit the jump for a larger version of the chart that shows the percentage of households in each county receiving a foreclosure notice each month:

I’ve been reading a lot of predictions the last few months that foreclosures are set to begin another big ramp up. While the overall year-to-year trend is still increasing here in the Seattle area, we are backing off of the big spike in March, and have yet to see a new surge materialize.

With purchasing demand taking a big hit post-tax-credit, I expect there will be renewed downward pressure on home prices through the end of this year, which will likely lead to foreclosures remaining highly elevated for quite some time.

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, hit this chart and drag the date slider to its full range. 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.


About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

15 comments:

  1. 1
    David Losh says:

    There is a saturation point, which is where we are now. Banks are holding off because there is no market to sell foreclosures. People who buy at auction need to sell them, or rent them. Selling them is a problem.

    Next is the rental market which, in my opinion, is high. Even if you are building a rental portfolio you are taking a huge risk without continued data. If rents decline, like I think they should, then we have another problem of diminishing equity.

    There are a lot of properties preparing for the market place, today. After this selling season is over there will be more disappointment. Next year, when people realize they were duped, once again, by the Real Estate Industry, and government involvement, there will be continued disappointment.

    What I read this morning leads me to think that banks are looking for a plan B for foreclosures. My hope is that the loan modification process will become more realistic.

    People are stuck, millions of people, with paying off a worthless asset. Banks, unless they want them all, will need to figure some way to keep people paying.

  2. 2

    Last Month’s Rosy(?) Job Data is the “Nail in the Coffin” IMO

    Article in part:
    “The Labor Department says the total unemployment benefit rolls fell by 255,000 to a seasonally adjusted 4.5 million…”

    That means a lot of marginal household incomes just lost their unemployment benefits and became part of the 32+ million ghost unemployed. It doesn’t matter if they were 1 or 2 income households, their pay just got butcher axed and so did the banks’ chances of getting monthly payments on bad loans.

  3. 3
    LA Relo says:

    If at anytime in the next year or so you think housing might start to turn around, just click this link here: http://www.cotohousingblog.com/wp-content/uploads/2010/01/CreditSuisseResetMarch092.jpg

    and let that sink in. I have to think that any lull in foreclosures is temporary.

  4. 4
    drshort says:

    RE: LA Relo @ 3

    Other than the option ARMs, most mortgages would probably reset to a lower interest rate/payment right now.

  5. 5
    Dirty_Renter says:

    RE: LA Relo @ 3

    Ah…the famous CS reset chart. I’m wondering if the CS folks have an estimate on how many of those have already went to sleep.

  6. 6
    Ross Jordan says:

    By David Losh @ 1:

    What I read this morning leads me to think that banks are looking for a plan B for foreclosures. My hope is that the loan modification process will become more realistic.

    Wishful thinking… loan modifications mean that banks have to recognize losses. That’s the last thing they want to do. At least carrying the properties on the books forever means no loss has to be taken =)

  7. 7

    By drshort @ 4:

    RE: LA Relo @ 3 – Other than the option ARMs, most mortgages would probably reset to a lower interest rate/payment right now.

    I haven’t seen an ARM DOT for quite some time, but they did used to be set so that they’d go up no matter what general interest rates did in the interim (“teaser rates”).

  8. 8

    […] appears that the number of foreclosures in the area will continue at a high rate into the foreseeable future into the foreseeable future. Thus, there will be more and more […]

  9. 9
    CCG says:

    “Next year, when people realize they were duped, once again, by the Real Estate Industry, and government involvement, there will be continued disappointment.”

    Well, as a friend of mine once said, fool me once, shame on you…fool me 17 times and the only explanation is that I’m a dumb—-.

  10. 10
    zipzippygc says:

    RE: drshort @ 4

    My experience has been common on a five year ARM 2003, with good credit:
    2008, I reset to 5, from 5.5%
    2009, I reset to 4.5 from 5%
    2010, I reset to 3.5, from 4.5%

    Floating my ARM has been one of my best decisions and it is possible it could be a successful strategy yet again in 2011.

    At the time of purchase we asked the mortgage broker what would happen in year 5+ and she said, ‘you will have to refi, it will be ugly’. That agent was trying to be ethical and was still as wrong as a person could be.

    Most of my financial success has been from resisting conventional wisdom and pack timing.

    Another example, I saved during the entire housing boom and never pulled money out of a pad that was beneath my loan ability.

  11. 11
    patient says:

    I have a feeling that recast at the end of the interrest only period is quite an issue around here as well. The majority of first time buyer I know who bought during the boom used I/Os, some have recast and it’s an ugly “surprise”.

  12. 12
    Jonness says:

    My mortgage lender’s current lending rate is 4.5% (0 points) on a 30-year fixed. That is just crazy low–to the point of being shocking. Despite this, I’m not seeing a lot of houses selling. To me, the current PacNW RE environment looks rather dismal.

    So I would love to take advantage of this low rate, but there is a big problem. Houses in this area are still WAY overpriced. I can’t get over how many people bought back around 2002 having put very little down and subsequently pulled several hundred grand out of the house and lived the good life. The problem is, when you buy a house and lose money, it has a way different effect on the economy than when you get a 0-down loan and hundreds of thousands of free dollars to buy toys and take vacations. For this reason, I think the economy is doomed for some time to come. The only way I see hitting the pre-bubble GDP is with more people, and that’s not the same.

    As bearish as I am, even I would think 4.5% 30-year fixed mortgages during Spring selling season would juice the market into a frenzy. But it appears the fundamentals are so messed up, not even interest-free loans can rescue it. This makes me think, when rates move up, we are in for a slaughter. I say bring on the REO’s and lets get back to 2002 prices.

  13. 13
    The Tim says:

    By Jonness @ 12:

    As bearish as I am, even I would think 4.5% 30-year fixed mortgages during Spring selling season would juice the market into a frenzy. But it appears the fundamentals are so messed up, not even interest-free loans can rescue it. This makes me think, when rates move up, we are in for a slaughter.

    I think we’re just seeing the results of the tax credit pulling sales forward from 2nd half 2010 and 2011. Low interest rates aren’t enough to prevent us from having to pay back the borrowed sales, just like I said we would last October.

  14. 14
    David Losh says:

    RE: Jonness @ 12

    4.5% should be normal. 6% should be the top end. 8% is investor lending.

    I forget where I learned, or heard, 4% is all that an investor needs for mortgages, because they are secured by assets. The problem today is that the price of the assets far exceeds the value.

    So, the interest rate is ultimately unimportant. The whole idea of the mortgage is to hold, and control, the asset. The asset isn’t a Real Estate until the mortgage is paid off.

    It’s kind of frustrating, at this point, that all the other Real Estate professionals are fighting this absolute truth. We want the lender out of our lives as quickly as possible. The lender is the enemy, they steal our wealth. They are Satan incarnate no matter what the interest rate.

  15. 15
    Jonness says:

    By David Losh @ 14:

    The lender is the enemy, they steal our wealth. They are Satan incarnate no matter what the interest rate.

    The concept of saving money to make a major purchase has all but been wiped out in this country. People generally prefer to pay at least double (including interest) for everything they buy. That’s part of the indentured servitude gig. And the poorer you are, the higher interest rate you pay.

    I like the concept of http://www.smartypig.com/ where you get over 2% while you save toward purchase goals of up to $250,000. Once you reach your goal, you buy outright instead of with credit. That’s kind of an old fashioned concept, but it served previous generations rather well.

Leave a Reply

Use your email address to sign up with Gravatar for a custom avatar.
Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Please read the rules before posting a comment.