Each month, Alan from Seattle Bubble religiously posts the Notice of Trustee Sale (NTS) numbers for King County. I’m very appreciative of his work because it saves me time each month so thanks again, Alan. Cruising SB last night, I found Alan’s numbers alarming for June: 1615 NTS were filed. Here are more numbers from Alan:
King County Notice of Trustee Sales
6/2009 – 1615
6/2008 – 576
6/2007 – 304
6/2006 – 299180% YOY (280% of last year)
The last few months:
6/2009 – 1615
5/2009 – 992
4/2009 – 938
3/2009: 1089
2/2009: 838
1/2009: 909
12/2008: 660
11/2008: 540
10/2008: 643
9/2008: 607
8/2008: 575
7/2008: 728
If we’re seeing 180% increase year over year with notice of trustee sale filings, then where are the REOs? Well as it turns out, if you compare the trustee deed filings for the same month, you’ll see that a low percentage of Notice of Trustee Sales actually go all the way through the auction process. Here’s comparison data courtesy of Jess and Julie Lyda, which gives us a visual comparing NTS v. Trustee Deeds, which means title changed hands from the owner in default to a new owner. That new owner could be the bank/lender or someone who was the high bidder at the trustee sale. Here’s a link to a larger image of the graph.
So what assumptions can we make given facts that we already know? We already know that banks and lenders are postponing the majority of trustee sales in King County. We don’t have any data as to how long postponements are lasting. If a homeowner is trying for a short sale or loan modification, we do know that the average wait time for banks to process these requests could easily be months based on nationwide reports from Realtors, home buyers and homeowners. We also know that there are many banks who have turned into zombies, waiting for their number to be called and the regulators to show up on a Friday afternoon. Postponing the losses from a foreclosure means the bankers can collect a paycheck for a few more months.
We also know that 50% of all loan modifications re-default by the 6 month mark. This pushes the foreclosure out longer and increases the overall losses to the bank/lender. Another assumption we can make comparing data from Alan and Julie is that hundreds of REOs will be coming back on the market each month, which will put further pressure on home values. Prime delinquencies are starting to surge and so are delinquencies in the upper home price ranges.
With what we know, home values will continue to feel pressure from many angles including higher inventory levels, continued tightening of underwriting guidelines, the lower prices of REO resales and short sales.
More on home price declines:
House Prices: The Long Tail from Calculated Risk
Case Shiller: Anemic Spring Bounce in April from Seattle Bubble
CR explains the difference between a bottom in housing starts and new construction homes and a bottom in residential resale homes in this post; Housing: Two Bottoms.
Jillayne,
It’s a good idea for a home buyer to do an analysis of all LTVs for the surrounding homes within 1/2 mile of the property they are buying. A lot of work, but worth the effort. Not the ones for sale or sold…ALL. That will give you a heads up as to where future sales might be heading within the area an appraiser will use for your future value.
Ardell, how do you recommend a home owner find out what homes have sold/closed for in their area? They can easily search listings for what’s “for sale”.
I’m finding that many home owners feel that the value of their home may be an exception… “well that home sold for this, but my home is worth more…”
It’s the most challenging aspect of trying to price a refinance (figuring out loan to value)… at least with a purchase, there’s an agreed to contract price to base a value on.
I think this information is available from a title insurance company’s customer service dept. Might not be free anymore but they definitely have access to the sales history of all homes in one neighborhood whether or not the house is currently for sale or sold 10 years ago.
Jillayne,
Best method is to walk the block and write down the addresses so you can note a bit about the house. Then pull them up on Zillow.
As to “financial health” of the neighborhood, it’s best to check all the LTVs, as many of the upside down houses are due to refinances and not Purchase Money Loans. You could have a dangerous neighborhood LTV without any recent purchases.
I’ll do a few samples of how that’s done in a post this morning.
Jillayne, do you know if the moratorium prevented filings of NTS or just delayed short sales?
NTS
Rhonda,
Finding the sold ones is easy. It’s finding the LTV on the neighbors that are not for sale that is more difficult. Most buyers can pull solds on Zillow or Redfin or Zip Realty or Trulia, maybe John L. Scott. I don’t use public sites, but most have been showing solds for some time now. King County records gives you some history, but Zillow is probably the best source for seeing previous sales in and around a house.
I think it’s time for a Zillow Zestimate post, to see how Zillow is doing these days relative to current sold prices.
Jillayne and Rhonda,
I’m pretty sure any Trustee sale is automatically postponed if an owner makes an application for the Making Home Affordable program. I also think that program was released on February 18th or so. Not sure if that date is in Jillayne’s post, but it was in Aubrey Cohen’s the other day.
Getting the first 30 day extension is usually pretty easy, from what I hear. After that the lienholder factors their time to consider a short sale offer or loan mod request, and can extend in bigger chunks of time. Usually in 30 day increments as in 30 day, 60 day, 90 day. More often they move in 30 or 60 day postponements strung together.
The postponements are most often happening because the lienholder doesn’t seriously consider the short sale offer until they are up against the deadline of Trustee Sale.
Hi Ardell,
“The postponements are most often happening because the lienholder doesn’t seriously consider the short sale offer until they are up against the deadline of Trustee Sale.”
Yes, this is probably true, however with SO many people in default, with the notice of trustee sales piling up (1615 in one month??!) lenders are postponing sales even though the homeowner continues to live in the home without making payments. Yes people are trying loan modifications, Obama refis, short sales. I’m not convinced that all of the 1615 are trying to refi, sell short, or modify the loan. A certain percentage will foreclose each month. Maybe that’s the percentage Julie Lyda shows us in her graph.
It takes time, money, and resources to bring a delinquent loan from the NTS stage to the REO stage. We already know that lenders are backed up in reviewing short sale offers and loan mods. Well, they probably only have a similar capacity to process a certain number of full foreclosures each month, too.
Julie’s low Trustee Deed numbers to me, mean that we will have a continued trickle/stream/flood of REOs coming into the market each month for quite a long time.
Some banks have issued press releases touting their ability to complete loan mods by hiring hundreds of new people. This is great….if only loan mods were not re-defaulting.
The number of trustee deeds for the month of June is terribly low considering the NTS numbers for Jan-June 09.
March 2009 was the last high water mark at 1089. The NTS’s filed in March would have foreclosed last month. Only 325 were actually foreclosed. That leaves 744 that were either redeemed or delayed.
I have no idea what that mix is, but for the sake of argument, let’s pretend it is 20% redeemed and 80% delayed. That would put, call it, 600 NTS’s that were recycled from March. That would leave 1000 new NTS filings this month. That still seems high, but not impossible based on past trends.
Still, all of the recent months are going to have some percent of refilings. 2/09 had 838 NTS with only 262 going to foreclosure in 5/09. That would imply that up to 576 filings were carried over to May’s 992 NTS’s.
I think we may be seeing a large increase in new NTS’s and a large number of NTS’s being carried over. If the trend continues, we may see a 50% jump in NTS filings every three months.
At least until the financial logjam bursts.
Alan, I agree. I think we will also see a steady increase in the number of trustee deeds month over month and year over year each month
March 2009 was the last high water mark at 1089. The NTS’s filed in March would have foreclosed last month. Only 325 were actually foreclosed. That leaves 744 that were either redeemed or delayed.
I have no idea what that mix is, but for the sake of argument, let’s pretend it is 20% redeemed and 80% delayed. That would put, call it, 600 NTS’s that were recycled from March. That would leave 1000 new NTS filings this month. That still seems high, but not impossible based on past trends.
Still, all of the recent months are going to have some percent of refilings. 2/09 had 838 NTS with only 262 going to foreclosure in 5/09. That would imply that up to 576 filings were carried over to May’s 992 NTS’s.
I think we may be seeing a large increase in new NTS’s and a large number of NTS’s being carried over. If the trend continues, we may see a 50% jump in NTS filings every three months.
At least until the financial logjam bursts.
ouch!
http://www.cnbc.com/id/31713614
Departed friend Sherwood Norton brought the Deed of Trust idea with him when he came up from California to head up Safeco Title. I wonder what he’d think of today’s far from settled scene. JG
Have these properties been selling at auctions? Or are they headed back to the lenders. Those numbers are pretty staggering, but nothing compared to Phoenix and maricopa county. These figures are staggering… home values are down the greatest there 54% since june of 06.