California Foreclosure Activity Up, But Still Near Historic Lows
Dataquick (a real estate data and news service) reported yesterday on foreclosure activity statewide. "Lending institutions sent 14,999 default notices to California homeowners during the October-to-December period. That was up 19.0 percent from 12,606 for the third quarter, and up 15.6 percent from 12,978 for 2004's fourth quarter, according to DataQuick Information Systems. Foreclosure activity hit a low during the third quarter of 2004 when 12,145 default notices were recorded. Defaults peaked in 1996's first quarter at 59,897. DataQuick's default statistics go back to 1992."
"Only about five percent of homeowners who find themselves in default actually lose their homes to foreclosure. Most are able to stop the foreclosure process by bringing their mortgage payments current, or by selling their home and paying the home loan(s) off. All regions of the state saw an increase in foreclosure activity, ranging from 10.5 percent in the Bay Area to 19.6 percent in Southern California."
Two things are interesting about this report: first, the Bay Area had the lowest increase in foreclosures of the areas surveyed, and second, with only 15,000 notices sent out, we are far below the 1996 levels of 60,000 notices, and only slightly above the historical low of 13,000. This is important to note. Just because foreclosures rise a bit, they are still well below what has been the 'norm' in the state.
"While foreclosure properties tugged property values down by almost ten percent in some areas nine years ago, the effect on today's market is negligible, DataQuick reported."
In San Francisco between Q4 2004 and Q4 2005, default NOTICES went from 73 to 106 (out of roughly 260,000 homeowners). Given the statement above about roughly 5% of notices turning into foreclosures, that means that we likely saw one or two additional foreclosures year-over-year. You gotta be really desperate for doom 'n gloom information to make an argument based on this data.
Of course we can count on Kelly Zito at the Chronicle to take this data and make it look like the end of the world is coming tomorrow.
posted by Matt Lanning @ 10:48 AM
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11 Comments:
Respectfully disagree that she tries to make more of this than it is. In the very first sentence she notes that the activity is still "well below the mid-1990's peaks." She also sites how low the current level is compared to earlier periods throughout the article.
Agreed, me thinks Matt doth whine too much.
Hmmm, seeing as how this blog is mostly about SF homes and not Bay Area, let's look at the SF foreclosure rate...45%! That seems to be subtantially higher than the state average. I never thought we'd be counting on Alameda to make us more respectable.
Gosh, you're so RIGHT! Out of 750,000 residents, over 260,000 of which are homeowners, that rise from 73 foreclosure NOTICES (not foreclosures) to 106 NOTICES is most definitely signaling the end of the housing market. Please...
If you're going to comment, at least read the article.
Additionally, "Only about five percent of homeowners who find themselves in default actually lose their homes to foreclosure."
So that would add ONE potential additional foreclosure between Q4 2005 and Q4 2005.
No reasonable person is going to look twice at this figure in their decision about buying a home.
I agree Matt that reasonable people will base their decision on whether or not to buy based on such a small number of notices going out. However, I still think it's an interesting indicator that the market may be under some stress given that the number is rising. Would also be interesting to see how many of those receiving the notices are recent first time buyers (say, within the last 3 years)that were using the oft mentioned "exotic loan products" that so many first time buyers are forced to use given the sky high cost of entering the market.
I read both articles, as well as your comments. First off, you yourself say "...the Bay Area had the lowest increase in foreclosures of the areas surveyed" which is both true and disingenuous, in that while the Bay Area overall had the lowest increase, San Francisco actually had one of the higher increases. Also, you yourself in this very statement are talking about percentages and not raw numbers. However, I do agree that on a raw number basis, the statistics are small enough to be irrelevant, but on a percentage basis, they are not.
Secondly, they are called trends. A 45% increase in foreclosure notices actually does mean a 45% increase in foreclosures (ignore the fact that only 5% of foreclosure notices result in foreclosures; that percentage seems to be constant regardless of the foreclosure notice rate). So, if next year, foreclosure notices continue to rise 45%, then the 2006Q4 number will be 153, and 5% of that will be 2.5 foreclosures, and the 2007Q4 number will be 222, and 5% will be 11, etc etc, which - over the course of time - is extremely relevant.
And I do recognize that it's somewhat unfair to label a series of 2 numbers as a "trend" but that's all I have to work with right now.
I think I just read somewhere foreclosures are going to be on the rise because of some bill that was passed that will make it hard for people to pay off debt.....
Still an ongoing trend I'd say...
Foreclosures up 37% year-to-year
Lower than historical averages, but still a trend.
But that's still Bay Area-wide... And there's no figure in this article for ACTUAL foreclosures... Notices of default rarely turn into foreclosures. Especially with the recent run-up in prices... Most people have plenty of equity and can sell to save the remaining equity.
If this was a problem in San Francisco, they would have included it in the article, I'm afraid.
And just looked up the actual article on Dataquick... Just as I suspected, even though they could run the HUGE headline about how there are 42% more notices of default in San Francisco vs. last year, that is a change from the whopping number of 89 up to 127. And based on some typical patterns, this means that there might have been about 6 foreclosures last year in Q2 and there might have been 9 this year.
Run for the hills! The sky is falling!
Like I always say, sensational journalism sells newspapers... Nothing more...
When foreclosure activity hits low, how does it affect the real estate industry?
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