Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Thursday, January 25, 2007

Foreclosure Increase Ominous or Not?


Sonoma County home sales dropped 25 percent in 2006. Sonoma County faces a 60 percent risk of further (price & sales) declines over the next two years, according to a survey released Wednesday.

Sonoma County had 143 foreclosures 4th Quarter 2005 and by 4th Quarter 2006 we are up to 323. 125.9% But don't give it a second thought. The guys at DataQuick will let us know if we should start worrying.

Datawho?

You know, DataQuick... those guys who count foreclosures as sales and call it all good.

"Risk is based on home prices, employment and the affordability of housing. The county's economy has stalled, losing jobs in recent months. And affordability has worsened because incomes did not keep pace with soaring prices before the recent downturn."

"While the correction was expected, it has been steeper and faster than anticipated. The 323 notices of default sent to Sonoma County homeowners in the fourth quarter compared with 143 during the same period a year earlier."

"The 125 percent increase was the largest since DataQuick began tracking defaults in 1992. It was the highest number since 328 notices were sent in the third quarter of 1997."

"Foreclosure activity has been rising because households facing financial difficulty, often from a job loss, illness or some other trouble, may have more difficulty refinancing or selling homes."

"Historically, only 5 to 7 percent of homeowners in default end up losing their homes, as most either refinance or sell. But 32 percent of the state's homeowners who were in default earlier in the year lost homes to foreclosure in the fourth quarter."

"Just over half of the loans that went into default statewide during the fourth quarter were made between January 2005 and February 2006. So those loans were made to buyers purchasing homes around the time the market was peaking in summer 2005, Karevoll said."

"Loans from this period also are at greater risk if they are interest-only or mortgages with minimum payment options."

"Interest-only loans and mortgages with minimum payment options proliferated in Sonoma County as buyers looked for ways to reduce monthly payments to purchase homes as prices soared." (70% of 2006 loans in Sonoma County were I/O of some sort)

"But those loans can put buyers in riskier financial positions, especially if they purchased homes with little or no down payment, relying on the market to build home values rather than paying down a loan."

"Exchange Bank does not fund interest-only and option loans. But the bank will package them through outside lenders for buyers who cannot afford more traditional loans with fixed rates and down payments."

'"Just because of the higher-priced homes, that is the product that is in demand in order to qualify," said Colleen Oller, vice president and real estate loan officer for Exchange Bank. "But now we're seeing a downside to that, especially if they're needing to sell. The value of those homes is not what they paid for them and they've got no equity built up."'

'"We're in the midst of an adjusting market right now, and we won't know until spring or summer if this is ominous or not," said Marshall Prentice, DataQuick's president."

Please see Dr. Housing Bubble for cool charts, graphs and great analysis of California's flood of foreclosures.

6 Comments:

At 1/25/2007 04:52:00 PM , Anonymous tom stone said...

hmmm ,she may be right,"ominous "will probably be too mild a word to describe the market come august.Is the rumor that "playboy" is going to have a spread on "babes of the housing bubble blogs" true?

 
At 1/25/2007 05:33:00 PM , Blogger Out at the peak said...

I use to go to the Sonoma Co Admin & Records Office to search for NODs and NTSs by hand in 2004. There were so few that I could write all the information down on a couple pieces of paper. Lending was so loose that almost all of the people in trouble were simply able to finance. There was no deal to be had. I digress.

Now there are so many NODs and NTSs, you would need to keep track of them in a database. And with so many NTS leads, why bother with NODs?

I wouldn't suggest bird-dogging in this environment though. I've seen flippers get burned from getting a place "$100K under comps" and still not turning a profit. It may be worth it if one needs to own primary residence now.

 
At 1/25/2007 08:57:00 PM , Blogger Dr Housing Bubble said...

"We're in the midst of an adjusting market right now, and we won't know until spring or summer if this is ominous or not," said Marshall Prentice, DataQuick's president."


Athena:

So many bubble bloggers have said this for months including you. But thanks Marshall at DataQuick! Now it is official. Its hot till its not eh? Glad DQ is on top of this.

 
At 1/25/2007 10:16:00 PM , Blogger Athena said...

Yes... all us bubble bloggers can now turn off our computers and go back to our regular jobs. We don't need to be blogging about the ominous nature of the housing crash until Spring or Summer. Marshall will let us know if the situation gets ominous.

nothing to see here... eyes front! eyes front! ;-D

 
At 1/26/2007 09:02:00 AM , Anonymous Anonymous said...

nothing to see here... eyes front! eyes front! ;-D

war is peace!
freedom is slavery!
ignorance is strength!
2 + 2 = 5!
ees party line, homedebtors!

 
At 1/27/2007 08:57:00 AM , Blogger Lisa said...

ggI'm noticing there's been a complete reversal in "experts'" quotes about equity. Last year, it was quaint & old fashioned to have equity in your home and not touch it. DL went as far as to say there's no point in paying off your mortgage, what a waste of money, why not use leverage to your advantage. There were commercials galore about "liberating" your equity and how much sense that made.

Now, it's a "big problem" that folks have no equity in their homes. Gee whiz.

 

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