September Foreclosure Data (w/ Long-Term Chart)

When I posted August foreclosure data from RealtyTrac last month with data going back to 2005, a complaint was aired (which I agreed with) that 2005-2008 is not sufficiently long-term. So, I spent some time with King County Records, and generated the following chart of Notice of Trustee sales going all the way back to 1979:

King County Notices of Trustee Sales
Click to enlarge

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.

As you can see, beginning in January of this year, Notices of Trustee Sales have been skyrocketing in a way not seen in the entire 30-year span of the data. They did drop significantly in August, down to 574 from 730 in July. However, they increased again in September, up to 607—a 76% increase over September 2007.

As prices continue to drop it will be interesting to see if foreclosures continue their unprecedented rapid increase.

Update: I was playing around with the graph a little more and thought this was interesting enough to add. It’s the same graph as above, but with the median single-family home price year-to-year change added and flipped vertically (I only have monthly median price data back to 1993):

King County Notices of Trustee Sales with Median Price Change
Click to enlarge

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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. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

42 comments:

  1. 1
    Andrey says:

    The spike is obvious, but based on the recent stock market action it is nothing compared to what is about to take place.

    I think when prices fall another 10% from current levels you will see way more foreclosures and a real panic in Seattle housing market and from there we will see an overshoot on the downside similar to what is happening in the stock market and oil right now.

  2. 2
    Yesler Hill says:

    Again, The Tim, another excellent chart. Thank you.

    I can’t see how the housing prices don’t keep dropping, and foreclosures don’t keep going up, if the entire rest of the economy is in a recession/depression? If no one, but a very few, have the money and credit score to buy, that’s not going to “stabilize” the housing market.

    If the feds step up and secure rewriting of failed mortgages to fixed low rate 30 year deals, then I can see foreclosures slowing. But, even then, if the economy is in the toilet, there still won’t be very many buyers?

  3. 3

    YES TIM, DESCRIPTIVE CHART

    You made the term “spike” lacking proper emphasis for the horrifying foreclosure growth in Seattle.

  4. 4
    Charles Dean says:

    Over long term like that, wouldn’t it be a more reasonable graph to show foreclosures per capita, since the population here has grown considerably since 1979?

  5. 5
    deejayoh says:

    Per homeowner would be a better normalization than per capita – as the percent of home ownership fluctuates over time as does the HH size. Dividing per capita would ignore both of these.

    that said, I don’t know where that data exists – and IIRC population in Seattle in 2008 sits right about where it did in 2000. We lost tons of people after the dot com bust – so the trend is right for at least that part of the graph

  6. 6
    cheapseats says:

    Wouldn’t an influx of people help keep foreclosures down?

  7. 7
    Charles Dean says:

    per homeowner would be better, you’re right, since there was such a huge increase in home ownership over the last few years.

  8. 8
    The Tim says:

    Here’s the same data indexed to the number of households, assuming linear growth between each census, with January 1979 = 100:

    If anyone knows where to get data on the number of homeowners in King County, I’ll be glad to plot it based on that.

  9. 9
    brettro says:

    ohshi-

  10. 10
    patient says:

    A related article from Fortune/cnn today ends with this comment:

    “Either way, there’s more pain ahead for both lenders and homeowners. Even after the declines of recent years, the cost of buying a house in many areas remains well above the price of a comparable rental.

    “The underlying value isn’t there,” says Garret of Casey Research. “A repricing of housing assets is absolutely necessary.”

    Amen to that.

    http://money.cnn.com/2008/10/23/news/housing.fix.fortune/index.htm?postversion=2008102315

  11. 11
    singliac says:

    The flipped y axis on the right makes the graph kind of hard to follow. It’s interesting to see the lines trend upward together, but it’s counter-intuitive when you try to correlate them. Doesn’t it make more sense to show foreclosures rising as prices fall? Anyhow, props on digging up that historic data. Very cool.

  12. 12
    Scotsman says:

    Ah, looks me like they’re heading back down. The worst is over- I’m calling a “bottom.”

    Interest rates are low, everyone go buy a house! ;-)

  13. 13
    anony says:

    So how is the foreclosure moratorium and mortgage rewrite promised by both the presidential candidates going to affect this?

    If homeowners don’t have to move because foreclosures can’t happen, and many can’t move because they owe more than buyers can or will pay, and there still is not much demand, what effect does that have on the people on this website? Stagnation? Long slow decline in prices?

  14. 14
    Herman says:

    It works like this anony…

    The government wants to guarantee that home prices will be stable or increase, because, I mean, look what happens when they don’t. So they take some more of your money and use it to artificially prop up the housing market. Mortgage guarantees and rewrites are just one of the ways they do that.

    They use your own money against you. You will never own a home.

  15. 15
    anony says:

    I do have a few options here, Herman. Mortgaging myself to the hilt for a cruddy place around here is one. Renting until prices drop here is another (they will, eventually). Moving to where prices have already dropped or never inflated so high is a third.

    The latter 2 options would obviously result in a much higher standard of living. It’s just a matter of how long I am willing to wait to stay close to family and friends in King Co.

    There are places east of the Cascades with half priced homes relative to King County, and there are well paying jobs there.

  16. 16
    patient says:

    Herman, what I understand it’s no longer about “propping up” home values at artifiical levels. It’s about avoiding foreclosures so that banks doesn’t need to take the full hit of a foreclosure. Some think that it is doable for the gov. to pay off the “underwater” difference with tax money so that the mortgage can be re-written to today’s home values. I don’t. To much money and to unfair use of tax money. ~30% of US residents are not homeowners, many are working class and vulnerable minorities. It want be pretty to take their money and pay off peoples mortages. Even if it is done it will most likely not stop the decline of home values to the historic rent/mortgage ratio.

  17. 17
    Herman says:

    I think most people on this blog are advising the second option. They run the numbers and show that renting is a better value in a declining housing market.

    Then some people will reply that with ownership comes pride and a sense of place that you can’t get from renting. Who can put a price on that? And that rentals are dumps.

    And then someone will conclude by saying that buying a home is a personal decision and, as long as you go in with a realistic understanding of the risks and benefits, you get to do what you want without our judgment.

    That’s the basic flow of commentary here. If you stay and read for a while, you’ll get a really good sense of the risks and benefits thanks to all the data and commentary. The commentary bias here can be on the negative side, but take a good look at the charts that Tim posts. They are great.

    Now, what riles the bloggers here are:

    * Real Estate agents who exaggerate and mislead their clients – which we think is most of them
    * Home owners who brag about the appreciation of their “investments” – but we don’t see them any more
    * Buyers who don’t understand the true economics of home ownership – and who think of them as no-risk, interest-bearing investments
    * Members of the press who don’t research their articles adequately, and print hollow articles that RE shills feed them
    * Irresponsible buyers and lenders
    * Government programs that bail out irresponsible buyers and lenders at our expense
    * Flippers, who do shoddy work and then overprice their flips – which is all of them

    Did I miss any?

  18. 18
    Herman says:

    To patient:

    “I’m not going to spend $700 billion dollars of your money just bailing out the Wall Street bankers and brokers who got us into this mess. I’m going to make sure we take care of the people who were devastated by the excesses of Wall Street and Washington. I’m going to spend a lot of that money to bring relief to you, and I’m not going to wait sixty days to start doing it.

    I have a plan to protect the value of your home and get it rising again by buying up bad mortgages and refinancing them so if your neighbor defaults he doesn’t bring down the value of your house with him.”

    – From John McCain’s speech in Virginia Beach last Monday.

  19. 19
    buyStocks says:

    * Now that the bubble which you all predicted has happened, ironically you also have to add gloating to your list(just to be sensitive to increasing number of people in upside down mortgages)

    I know this is way off subject, but holy christ, tomorrow’s looking to be a possible blood bath in the stock market. DOW futures already down 350 overnight. The poor japanese, seems like their losing 10% every couple days. The overnight libor is also starting to creep up. Is this gonna be round 2 bailout coming soon? I’m still buying as we go to the bottom, but doesn’t seem like we’re anywhere close to it.

  20. 20
    b says:

    buyStocks –

    the correction which has recently occurred is due to the credit markets and financial implosions. I am not sure I would buy stocks yet as the correction for shitty earnings and a bad recession are just now being factored in. DOW 5k?

  21. 21
    patient says:

    Nice snippet Herman, and one more reason not to vote for McCain, not that I need another. It does however mostly mention buying mortgages to avoid foreclosures as I mentioned. If it would be implemented which I don’t think it will it would still not prevent the fall in prices from tougher lending standards. Lending standards alone will bring prices back to rental levels. Frankly I would prefer that foreclosures are avoided if it can be done without tax payers money. I think it’s likely prices will fall another 30% with or without foreclosures.

  22. 22
    buyStocks says:

    b –
    To avoid any speculation where its gonna bottom out, I’m just dollar averaging stock index funds weekly for the very long term (basically putting my retirement contributions into overdrive). DOW futures now down 432 overnight so far, we could break 8K tomorrow. Sort of like a bad horror flick, people think were at the bottom, there’s an illusionary calmness, then the movie just gets exponentially more violent. I’m not even gonna attempt to guess how low the DOW’s gonna go…

  23. 23
    Buceri says:

    Yesterday’s McCain rally in Sarasota, FL was the strangest.

    First he called Obama a socialist that wants to spread wealth (and the crowd – vast majority under $250K Household residents, you must assume) booed. Then within minutes he made the promise that Herman quoted above (buying bad mortgages with gov. money) and the crowd cheered.

    Puzzling…

  24. 24
    David Losh says:

    Responsiblility.

    Home Owners who bought or refinanced had a resonable expectation that the price they paid was fair.

    The lender lent the money. The lender has an appraisal. The lender has access to any and all financial information of the borrower.

    Now it’s responsible for a buyer to put 20% down on a home purchase that is going down in price every day. I’ve seen people on this blog, the Tim, advocate buyers put 20% down on a home purchase. It’s the responsible thing to do.

    How does that work out? Lenders lend money based on the value of the asset, but they want 20% down. Now I understand the 20% if the value of the asset is in line with what it will sell for readily on the open market. The 20% covers the selling and foreclosure costs. Then the lender sells the asset and begins getting interest income again.

    The lender supposedly makes money from interest income the same as your land lord makes money from rental income. That’s the business. It’s a tough business except in the past ten to twelve years.

    In the past ten to twelve years the skies have opened up and poured money. The stock market went crazy. Money was flowing like water into every low level scam that any one could think of. Venture Capital had so many options they threw money at anything that looked good on paper.

    Hedge Funds, Pension Plans, or Investment Groups had tons of cash to invest in other corporations that were based on the expanding global market place. A lot of that money went into housing.

    Corporations built, financed, and sold, housing units. Corporations owned the Home Depots, Lowes, and Lumber Supply. Other branches of the same financiers owned the mortgage companies, credit card companies, and secondary market brokerages that in turn bundled securities to sell to your Pension Fund.

    You gave them the money. You with the bank accounts at 4% interest and you with the Pension Plan. You guys who gave the stock market those tons of cash are now seeing it disappear. It’s not coming back. The Dow should be at 8000, tops. Your money is gone, for nothing.

    The responsibility for this mess is the responsible public. Those foreclosure numbers? How many foreclosures are owned by corporations who are walking away from what was a good thing when those housing units would sell? How many Financial Institutions are closing doors now that the ride is over?

    No we all gave these guys money in the good times. We all are responsible for not saying enough. That’s why I like this blog, this one guy said something, but now that the time is here none of us should point fingers.

  25. 25
    anony says:

    Herman,

    You are dead on in that McCain thinks he can spend our money to make home prices stop falling then start increasing like before. He actually said rising home prices create wealth, which demonstrates a fundamental ignorance of what wealth is (they help transfer wealth from a buyer to a seller, but rising home prices don’t actually create anything). Obama has also said he will have a moratorium on foreclosures, although he hasn’t outlined it as specifically or focused on it as much.

    The big problem though, is even if he were to win and manage to refinance all the mortgages, it still wouldn’t create people who could or would pay today’s prices. So it would allow sellers to keep up whatever listing prices they wanted, but no-one would buy. Result, high inventory and low sales volume, like we have seen. Notice the news earlier this week on SoCal’s sales rising, primarily because of much lower prices, which were a result of a lot of the sales being foreclosures? It all fits together.

    I think the candidate’s plans would just result in continued high inventory, low sales volume, immobile workforce in the US. Smart sellers who could afford it would slowly get the message and lower prices, but only very reluctantly. I don’t see anything that would push prices upward.

    Does anyone else agree with those conclusions or have anything to add? Do you think if they could slow the price drop, it would result in an outflow of people like me from Seattle to more affordable places like Eastern WA or even SoCal?

    How about these big public works projects like alternative energy plants (nuclear, solar, etc.) in the middle of nowhere? Who is going to design and build them if homeowners can’t sell their homes?

  26. 26
    buyStocks says:

    David,
    I’m also questioning the 20% down in a market that has now proven to be very unstable. When I buy a house in the future, 10% down is looking much better.

  27. 27
    Bella says:

    @6
    cheapseats, how would an influx help keep foreclosures down when unemployment is up? Your theory would make sense at some point in time, but right now, I don’t know.

    Also, regarding responsibility:
    It seems like so much of this crisis is due to people assuming that they could sell their home for (a lot) more than what they bought it for either to make a profit in just a few years, or if they needed to because of a financial crisis. That does not seem responsible to me. My understanding of homebuying is that traditionally a home is a safe purchase because as long as you take care of it, it rarely depreciates, and usually (slowly) appreciates. Recently, people have expected the value of their home to skyrocket in a few years, and bought it based on that assumption. I bought a modest home that I plan to live in for many years, possibly even the rest of my life. Because the purchase price was not terribly high (comparatively, anyway) I don’t expect it to lose that much value, but it doesn’t matter a ton anyway, as we have no plans to sell it anytime soon.
    Of course, there are always emergencies that come up, and I know some people were affected by those, but we are young enough, healthy, and in stable job markets. To me, this is responsibility.

    (This is an oversimplification, as I could go on and on for hours about how I think people acted irresponsibly for the past several years, and how one could be more responsible about purchasing a home.)

  28. 28
  29. 29
    John says:

    These guys are having their 30:1 leverage taken away from them.

  30. 30

    GREAT BLOGS ON THE MORTGAGE BAILOUT OPTIONS

    From my news peep hole I see McCain wanting full contract value bailout and Obama wanting current market value bailout. Neither makes sense to me either, but lets analyze there similarities:

    So we refinance a $200-400K loan at old high value, like McCain wants, can Joe Lunchbox making $50K or less afford the refinance contract, let alone qualify, when this unit was sold at partial payment teaser rate in the first place?

    Hades no.

    Will Obama’s plan work?

    For about the same reason, Hades no.

    That’s why, in my humble opinion, this early foreclosure witches brew is just talk and no action to date. The presidential candidates will promise you anything to get elected.

    Another major flaw in the mortgage bailout ointment, this is just round 1 [I see round 2, 3, 4, etc, etc years ahead of us] of the bailouts needed and we already bought about $1Trillion in mass bank stock. Guess what gang; the banks are just pocketing the money to protect them from economic meltdown today and Paulson is begging them to free it it up in today’s news. Fat chance Paulson, like I said in a previous blog, “we might as well have piled the bailout money up and lit a match to it”.

  31. 31

    Hedge funds are not levered 30:1; that was investment banks. They are done. Most hedge funds are sitting in at least 50% cash right now.

    Wait for a double bottom at 7800 on the Dow, and then buy as much as you can (keep a stop in at a 3% loss)…if we break through 7800 on the Dow, look out below, but if we bounce off, we’ll be back up to 9500, 10000 by early next year.

  32. 32

    MORE ON MY BLOG ABOVE

    Another reason the federal bailout of bank stock purchses aren’t working:

    The news says today, with the global economic meltdown, businesses and individuals aren’t in the mood to go in debt at any rate anyway. Can you blame them?

  33. 33

    NICE TAKE CAPT KIRKLAND

    I bet you were one of those well educated types that told us to buy stocks when the DOW hit 14000, after all there’s plenty of growth to go.

    The problem with your prediction is simple, its called stock profits. Lately, there isn’t a financial incentive for stocks to go up when profits are flat. I think many US stocks are way overpriced at DOW 8200, with another 30% drop coming soon to a theater near you. Dr Roubini agrees with me and he hasn’t been wrong in his predictions yet.

  34. 34
    buyStocks says:

    gotta agree,
    Seems crazy to try to guess the bottom capt kirk. You’re probably better off sending the 3% you’d most likely lose to the obama compaign, and do some good with it.

  35. 35
    TJ_98370 says:

    Captain Kirkland said:

    Hedge funds are not levered 30:1; that was investment banks……
    .

    How do you know this? I’m hardly an expert, but from what I read hedge fund leverage is only limited by the willingness of their creditors and counterparties. However, I can understand how they may have read the writing on the wall and have been unwinding recently.
    .

  36. 36
    Jillayne says:

    Foreclosures will spike up again in Oct. I’m hearing 50 to 60 new TSG orders every business day so far for Oct.

  37. 37

    […] The graphs below 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 this post. […]

  38. 38

    […] The graphs below 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 this post. […]

  39. 39

    […] The graphs below 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 this post. […]

  40. 40

    […] 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 this post. […]

  41. 41

    […] 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 this post. […]

  42. 42

    […] 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 this post. […]

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