Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Thursday, August 03, 2006

All Waves Crash, Baby

"Waning home price appreciation has recently caused the fastest rate of increase in foreclosure activity in California in the past 14 years, DataQuick Information Systems reported Wednesday."

"The company compared foreclosure activity as measured by default notices between the second quarter of this year and the second quarter of 2005."

"Default notices are filed with the county recorder's office and mark the first step in the foreclosure process. The increase in the default notice rate was highest in Northern California, 97 percent, and in the Central Valley, 85 percent."

"Every Bay Area county except Marin experienced an increase in the notices of default on houses and condos during the one-year period ending June 30, according to DataQuick's figures."

"They increased 74 percent in Napa County; 65 percent in Solano County; 53 percent in Sonoma County and 51 percent."

"Default notices increased 104 percent in Riverside County; 99 percent in San Diego County; 108 percent in Sacramento County; 110 percent in Stanislaus County and 126 percent in Placer County."

"In Sutter County, the default rate increased 229 percent. There, second quarter default notices increased from 17 in 2005 to 56 in 2006."

"Dennis Kelly, assistant manager of Coldwell Banker in San Rafael, said DataQuick's figures sound "extreme,'' but he said he has recently noticed anecdotal evidence of some people in Marin County falling behind their mortgage payments, especially those with 100 percent financing of their mortgage. He said the default notice rate in Marin County could increase."

"Kelly said it takes lenders three to six months to file a notice of default and then another three months for lenders to issue a notice of sale."

"DataQuick's Marshall Prentice said that while rising payments on adjustable rate mortgages can trigger "borrower distress,'' the spike in defaults is mainly due to slowing price appreciation.
"It makes it harder for people who fall behind on their mortgage to sell their homes and pay off the lender,'' Prentice said."


At 8/03/2006 08:49:00 PM , Blogger Athena said...

So how exactly does the genius quoted in this article get that the rise in defaults are due to the slowing in appreciation?

I mean was the appreciation making the mortgage payments?

Last time I checked default means payments are not getting made... and when payments aren't getting made it is usually due to financial distress, not having enough money in the bank to make the payment.

So how exactly can the slowing in appreciation be the cause of the defaults?

At 8/03/2006 11:16:00 PM , Blogger marin_explorer said...

Every Bay Area county except Marin experienced an increase

I've watched the stats for Marin over the last year. I can say for certain they've increased, although not as much as Sonoma/Napa. And I'm sure these IO morts have been abused from Napa to Santa Cruz county.

Athena--I share your sentiment. I don't think we're yet at the point where people are selling due to insolvency. Does anyone see panic pricing? Despite current inventory, aren't the brunt of loan resets to come?

At 8/03/2006 11:59:00 PM , Anonymous pmd said...

This has been a popular topic on SoCal MSM, at least on talk radio. The consensus seems to be that since the foreclosure rate was, "'let's just say' infinitely low" a year ago, even a 100% uptick is unimpressive.

I find that attitude very hard to believe, especially when I hear that these foreclosure notices kick in after 3(!) missed payments. I was a landlord in the 90's, and I gotta tellya, TTHHRRREEEEEEEEE MISSEDDD PAYMENTSSSS (!!!) would leave me apoplectic. Call me names, but eviction ain't no fun for anyone.

I don't know whose talking points require the dismissal of foreclosure notices, but I'm here to tellya some game is afoot when that many payments are behind.

At 8/04/2006 09:09:00 AM , Blogger Athena said...

Athena--I share your sentiment. I don't think we're yet at the point where people are selling due to insolvency. Does anyone see panic pricing? Despite current inventory, aren't the brunt of loan resets to come?

well... I was running the foreclosure list in Sonoma last night... and noticed a couple of problem streets in a friend's neighborhood with multiple for sale signs... that have been for sale for the better part of the last year at least... and low and behold there are a couple on each street on the foreclosure list.

This morning I was just emailed a price reduction and the house in the neighborhood that has comps that inched up over 500k is now priced at $459k.

maybe later on I can find some time to zillow the properties... but if it goes below the current listing price this could be the house that brings down all the comps. Rightfully so too... in fact they need to go back to 2001 prices to be appropriately priced...

At 8/04/2006 11:09:00 AM , Anonymous Anonymous said...

the foreclosures we are seeing now are more the result of $# gasoline than they are mortgage rests,which just started in june.the lack of appreciation and actual depreciation just means that people who were bailed out by the market in the last few years are finding out the usual consequences for stupidity and bad luck.we will se a potful of defaults in the nexxt months as people exhaust their resources.

At 8/04/2006 01:09:00 PM , Blogger Marinite said...

Gah! Marin was the only county where the rate of default went negative. Other wealthy counties all went up. What's up with that?

At 8/04/2006 10:22:00 PM , Blogger Athena said...

looks like barrett, baines, lucas and comstock are having a hard time keeping houses off the foreclosure lists. right in the heart of the craphole that is boyes springs... go figure. what are these flippers that were banking on the area being up and coming and people who make $200k wanting to live there?

At 8/05/2006 04:23:00 PM , Blogger Lisa said...

With slowing appreciation, you can't re-finance, especially if you're already at close to 100% of the home's "peak value". With the slowing market, if you can't sell...voila. Default. A friend of mine who is a broker in Sonoma said that her office is handling several short sales. Already! Wait 'til we actually start seeing declines in YOY, where folks are underwater on their mortgage. This is just getting started. That's the danger zone of these nothing down on tiny down payments. With no equity, there's no safety net and the homeowner is still on the hook.

At 8/05/2006 05:03:00 PM , Blogger Athena said...

I know... I'm telling you... Schadenfreude is *such* an embarassing emotion! ;-)


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