Posted by: 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.

23 responses to “Distressed Sales Hit Lowest Point in Over Four Years”

  1. Erik

    It looks to me that the market is stabilizing. Sam posted an awesome article yesterday that at one spot said that we probably won’t see a big boom and bust because of how closely things are regulated now as compared to our previous bubble. Very good point. Anyway, here’s the article again incase you missed it:

    http://www.forbes.com/sites/morganbrennan/2013/04/12/where-u-s-real-estate-might-be-getting-bubbly/

    After the remaining distressed housing washes through, the housing market prices will probably be regulated by interest rates until everything gets back to normal.

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  2. softwarengineer

    Hey, the Economy Isn’t Perfect

    “It’s going to be a steady, safe growth in terms of both housing price and market activity,” he said. “But you will see occasional blips up and down depending on local economic forces.

    “Again a lot depends on local demand.”

    Staff writer Alice Culp:

    aculp@sbtinfo.com

    574-235-6343

    ——————————————————————————–
    Numbers by county

    The year-to-date numbers by county in April

    St. Joseph County:

    805 — number of closed home sales, 5.4 percent increase

    $93,000 — median sales price

    Elkhart County

    517 — closed home sales, 1.4 percent increase

    $100,450 — median sales price

    Marshall County

    101 — closed home sales, 11 percent increase

    $110,000 — median sales price

    LaPorte County

    302 — closed home sales, 23.3 percent increase

    $105,500 — median sales price

    http://articles.southbendtribune.com/2013-06-09/business/39855659_1_housing-market-sales-prices-inventory

    LOL…..problems selling homes under $100K in Southbend Indiana?

    How the hades can Seattle sell in comparison at 2-4 times the price?

    Let’s look at the home owner occupied household incomes in both areas from the same website too:

    Southbend: $49K
    Seattle: $83K

    Unemployment 2010-2012:

    Southbend: 13.5-9.5%
    Seattle: 6.3-7.8% {Our’s worsened, their’s significantly improved}

    Med Household Income:

    Sorthbend: $35K
    Seattle: $61K

    http://www.areavibes.com/south+bend-in/employment/
    http://www.areavibes.com/seattle-wa/employment/

    OK, what does this mean? Well, one thing’s for sure….$500-600 rent will getcha a house and yard in Southbend….it might getcha a studio apartment in Seattle….LOL

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  3. sam

    RE: Erik @ 1

    Erik, I was confused by the title and the inferences/conclusion in that article.

    For the most part Glen painted a rosy picture and then Glen mentioned certain not so rosy scenarios. Out of the 20 offers received on the orange county home, 17 were 3-5% down payment. When you are levered so much and paying PMI, raising the offer in a multiple bid scenario is not a big deal. If this is representative of non cash loans in most markets, Its not a good sign. When interest rates go up, there will be some correction and these folks will not have an incentive to own an underwater home, if their financial position changes. Even worse they won’t be able to do a refi to get rid of the PMI as they will need to bring money to the table as interest rates have gone up and prices fell.

    The homes I like on the east side are over priced than 2006, the ones that stay on the market are the ones that no one, including me, does not want and the ones that I like have multiple bids. I don’t want to be a loser by winning a bid.

    We are at about 3600 SFH now. Does anyone have any meaningful predictions or historical analysis on how long it will take inventory to reach about 7000 SFH in King County?

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  4. Ron

    RE: Erik @ 1

    The quote at the end “It’s a mad, mad world of booms and busts and now booms again, with hardly anything in between” sums up my belief perfectly.

    I’m not convinced that regulations are in place to prevent another massive bubble fueled by buyers putting less then 5% down who are willing to walk away after a market downturn. I did that twice (put down less then 5%) in 1999 and survived the down turn but most people won’t.

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  5. Erik

    RE: sam @ 2
    In the article, I concentrated more on the section titled “Why We’re Not in a Bubble in Most Places.” I felt like there were a lot of good points of why prices may sustain. Tim’s post today further supported stabilization in my opinion, so I cited the article you posted yesterday.
    Nobody wants to make concrete conclusions because they don’t want to be wrong. That’s why the conclusion was weak and confusing.

    Ron- Yeah, I was debating that too. I don’t understand all of the variables that are unregulated that could effect prices. Can you suggest some uncontrolled variables in addition to down payment?

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  6. Erik

    By Erik @ 5:

    RE: sam @ 2
    Can you suggest some uncontrolled variables in addition to down payment?

    Probably the wrong terminology. What I meant by uncontrolled variables is things that can push prices up and are not closely regulated. Prices may skyrocket, but what are some things that can make them increase substantially.

    -low down payment
    -low interest rates
    -unregulated appraisals
    etc.

    Please suggest other other factors that affect prices that could ultimately cause the boom/bust scenario. I’m not able to identify any big risks.

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  7. sam

    What will be the impact of shadow inventory in the market? It is possible that banks will start to get the shadow inventory into the market at higher prices. Where can we find detailed information on how many houses are in the foreclosure process, but not on the market. I am particularly interested about the east side.

    I am almost close to giving up hope on the housing market for now, wait for the interest rates and prices to stabilize.

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  8. Erik

    RE: sam @ 7
    Here is the only way I know on how to see shadow inventory…

    http://www.redfin.com/homes-for-sale#!lat=47.686597839218045&long=-122.16811281149728&market=seattle&sf=4&v=8&zoomLevel=13

    On a previous blog posting of tim’s he did this as shown below.
    http://seattlebubble.com/blog/2011/02/24/redfin-maps-all-the-bank-owned-reo-shadow-inventory/

    I’m not clear on where in the foreclosure process these houses are shown.

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  9. David Losh

    The risk is investment opportunity.

    What this blog post is demonstrating is that the banks are winding down that phantom shadow inventory. We are at the end of the line, and I think everyone, but a select few, know it.

    That select few are property owners who are hoping for big gains in housing that aren’t coming. If you didn’t sell, and capture your equity in this last run up in pricing you are now stuck.

    Going forward sellers will be taking less, and as that happens more sellers who have been waiting for greater gains will wise up, and list. That includes investment groups.

    You could go long on housing, but there is no point in it. The returns are too low.

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  10. sam

    RE: Erik @ 8

    Thanks Erik,

    So as per the map, there is not much shadow inventory, assuming everything out there is really there.

    Why is Fannie Mae buying homes for $470K at an Auction? Are Fannie/Freddie really buying or Is that number just made up stuff? I don’t see any reason why they should be buying auction homes. Is there more than what meets the eye?

    http://www.redfin.com/WA/Issaquah/2491-NE-Kyle-Ct-98029/home/22664887

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  11. Erik

    RE: sam @ 10
    From what I understand, Fannie and Freddie buy the homes that don’t sell at the Trustee Sale for whatever reason and list it for sale as a foreclosure at a further reduced price. So lender takes home–>puts up for auction at trustee sale–>Fannie/Freddie buys back if it doesn’t sell at the auction and reduces price and lists it with homepath or homesteps if they are still doing that.

    Wreckingbull and the Goon squad- I see you are out giving me thumbs down on all my comments again. If you can add something to this or correct me, please do. The thumbs down doesn’t help anyone.

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  12. David B.

    RE: softwarengineer @ 2 – Why in Hades would I want to move to South Bend? Even if I could find a comparable software developer position there, odds are it wouldn’t be as good a match as I could find in a bigger market. South Bend would doubtless have even higher unemployment rates if many people didn’t simply leave for greener pastures after being unsuccessful in their job search for a while.

    To that can be added no nearby mountains and a climate that lurches wildly between tropical and arctic with only a couple month’s sum total of comfortable days in the transitional seasons of the year (I’ve lived in the Midwest, I speak from experience).

    You get what you pay for.

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  13. Saulac

    By Erik @ 11:

    RE: sam @ 10
    From what I understand, Fannie and Freddie buy the homes that don’t sell at the Trustee Sale for whatever reason and list it for sale as a foreclosure at a further reduced price. So lender takes home–>puts up for auction at trustee sale–>Fannie/Freddie buys back if it doesn’t sell at the auction and reduces price and lists it with homepath or homesteps if they are still doing that.

    You seem to lack the basic of the foreclosure process, and what “shadow” inventory shown on Redfin. This might turn people off.
    Spend a bit more time reading SB. All the info is here. I wanted to find some old posts that might help you…but then I realized I know what I know from picking things up here and there, good and bad. One would miss a lot if he only learn by having people correct him.

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  14. Scotsman

    RE: Erik @ 1

    “After the remaining distressed housing washes through, the housing market prices will probably be regulated by interest rates until everything gets back to normal.”

    No, housing prices will continue to be determined by supply and demand just like they always have been. Interest rates are a very small part of that. In fact, The Tim and others have shown that the correlation between home prices and interest rates is pretty weak. Do a search. As for distressed inventory there’s no simple answer there either. Inventory in which price range? Short sale or conventional? My guess would be that the impact of distressed inventory is behind us, at least for now. The big picture here is a great deal more complicated that you seem to believe.

    Finally, it’s going to be a long wait- perhaps measured in generations- before things get back to “normal,” what ever that may be.

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  15. whatsmyname

    Eric, when the trustee takes a property to auction, it is for the purpose of satisfying the obligation to the person compelling the sale, usually the first lienholder. Since that obligation can be satisfied with the note itself, the first lienholder can bid satisfaction of that note for the full amount without investing any cash. This cuts to the chase, and sets the bar for anyone who might bid higher, and therefore get the full obligation paid off. If there is no higher bidder, the lender cum seller can attempt to minimize its losses in a market that is more favorable to a seller than the courthouse steps. So technically, they do buy it, but with money that’s long out the door.

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  16. sam

    This is on Yahoo Home page now

    http://news.yahoo.com/realtytrac-home-repossessions-rose-may-040336864.html

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  17. Mike

    RE: Ron @ 4 – this is one area where I believe we need greater market transparency. You should be able to tell ahead of time whether you’re buying in an area where people generally put 5% down or 20%+ down. Now, you really have to cobble together the data to figure that out, and its still not reliable. A few months ago Redfin said average down in my hood was 15%, this month it’s 52% on similar volume. 12 -36 month moving averages would be nice…

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  18. David Losh

    RE: Scotsman @ 14

    I hate the supply, and demand argument for housing because no one needs to own a home. All you need is a room to sleep in; the rest of the time you might as well be working.

    The economy is the thing that determines the price of housing. Is Real Estate a part of your investment portfolio, or a life style choice that knows no price?

    Investment dollars in Real Estate, as a rental market, probably determine the price of housing more than what we might call supply.

    How much of your income is spent on housing, and what is the return on that investment? Those are the questions that determine the price of housing.

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  19. David Losh

    RE: whatsmyname @ 15

    Good reply, thanks!

    In the olden days people could bid over the price of the Note, and still get a bargain, today, not so much.

    The banks can minimize losses, or even get a gain, if the property is presented well to the market outside of the foreclosure auction market.

    That’s why I don’t go to the auctions any more. It’s just no fun.

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  20. softwarengineer

    WaaaaHooooo!!!!

    I’ll break ou the SB Champaign…

    I made the 11 downthumb club….that means I’m really on to something truthful and important :-)

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  21. softwarengineer

    RE: David B. @ 12

    Why in Hades do You Pay Pirate Rates for Decrepit Housing in Seattle?

    My point is “purely mathematical”…..ya know “math and science”, what we don’t teach in our public schools anymore.

    Its “affordability” I was addressing not why this overcrowded overpriced area with most of its trees cut down is sooooo much better than “wide open” tornado country with giant homes and lots…..earthquake country like Seattle is sooooo much safer.

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  22. David B.

    RE: softwarengineer @ 21 – I’m don’t live “in Seattle” anymore; I moved to Bainbridge Island earlier this year. There’s plenty of trees here. My home is not in the least “decrepit”. While I’m sure I’m paying more rent than I would for something of a comparable size in South Bend, I can easily afford that rent and I also have access to a significantly better job market, a significantly nicer climate, and significantly better outdoor recreation opportunities.

    Focusing merely on money spent while ignoring all other factors is penny wise and pound foolish. (Do you live in a 20-year-old single-wide in an economically depressed county in rural Mississippi? By your metric, that would appear to be the near-ideal (i.e. cheapest possible) home.)

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  23. Dirty Renter in Banjo Country

    By softwarengineer @ 20:

    WaaaaHooooo!!!!

    I’ll break ou the SB Champaign…

    I made the 11 downthumb club….that means I’m really on to something truthful and important :-)

    I just gave you a thumbs up on the whited-out post, so I could try to read the post. My eyes aren’t so good nowadays…even with 4 of them.

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