This is the most recent data I assembled from realtytrac.com on the foreclosure activities in the SF Bay Area. It serves as a cumulative "leading indicator" for the state of the housing market for the next 6-9 months - after all these foreclosures eventually end up on the market.
Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09
Santa Clara County
Pre-foreclosure 417 506 1143 1191 1117 1807
Auction 655 748 747 581 505 819
REO 658 471 734 521 287 439
TOTAL 1730 1725 2624 2293 1909 3065
% Change -0.3 34.3 -14.4 -20.1 37.7
San Mateo County
Pre-foreclosure 162 143 353 343 356 441
Auction 139 207 231 155 118 213
REO 110 91 159 113 98 85
TOTAL 411 441 743 611 572 739
% Change 6.8 40.6 -21.6 -6.8 22.6
San Francisco County
Pre-foreclosure 59 74 176 147 214 247
Auction 64 89 116 76 48 113
REO 53 43 58 35 43 32
TOTAL 176 206 350 258 305 392
% Change 14.6 41.1 -35.7 15.4 22.2
TOTAL 2317 2372 3717 3162 2786 4196
% Change 2.3 36.2 -17.6 -13.5 33.6
Basically, this data shows that the amount of "foreclosure activities" continues to grow rapidly across all three counties, instead of declining:
This means we are going to see more foreclosed property on the market in the coming months.
How much will this trend affect the prices in the Bay Area?
Here is one very imporant observation. By comparing different activities you can notice that there is a huge GAP between the early-state activities (pre-foreclosure) and later-state activities (REO). For example, the ratio between pre-foreclosures and REOs for March was 4.1 in Santa Clara, 5.2 in San Mateo, and 7.7 (!!) in San Francisco. What does this mean?
This means that the current amount of foreclosures on the market will inevitably have to MULTIPLY FROM THEIR TODAY'S LEVELS in order to make up for this gap! Correct me if I am wrong, but it looks like in the next 6-12 months we are going to see four/five times more foreclosures on the market to what we see today in the Bay Area!!
If this is all correct, foreclosures will be playing INCREASING role in driving the prices further DOWN across all three counties during this and the next year.
Fitch Ratings revised their real estate forecast ;
http://www.fitchratings.com/corporate/events/press
Fitch: U.S. House Prices to Drop Another 12.5% Before Hitting Bottom
23 Apr 2009 9:00 AM (EDT)
Fitch Ratings-New York-23 April 2009: U.S. home prices will fall an additional 12.5% from 2008's year end values before exhibiting more stability in late 2010, according to Fitch Ratings. This forecast reflects a reversion to early 2002's prices. Currently, prices are hovering around levels seen in mid 2003.
Fitch revised its projection from earlier expectations of a 10% further decline as of second quarter-2008 (2Q'08). The revision to Fitch's October 2008 forecast is due to the extremely weak economic factors in the fourth quarter of 2008, said Group Managing Director and U.S. RMBS group head Huxley Somerville. 'Very weak employment, limited re-financing opportunities and turbulent financial markets have extended into the first months of 2009, while government initiated programs have yet to yield any positive benefits,' said Somerville.
To date, national home prices have declined by 27%. Fitch's revised peak-to-trough expectation is for prices to decline by 36% from the peak price achieved in mid-2006. The additional 9% decline represents a 12.5% decline from today's levels. The 36% peak-to-trough decline is up from the forecast 30% decline reported in October 2008. Fitch believes that most of the correction will be incurred in the next two years, with prices exhibiting more stability from late 2010. Fitch's forecast analysis assumes 1.5% inflation rate for 2009 and 2010 and 3% for the following three years. Within the next few weeks, Fitch will release a state-by-state forecast of home price declines.
Fitch's forecast is primarily based on its expectation that home prices will return closer to the long-term historical mean, which has been the pattern of prior home price cycles. Given the volatile economic conditions, Fitch will continue to review its forecasts to ensure they are still accurate and provide updates every six months.
The democrats were counting on the bankruptcy courts to stem the tide of potential future foreclosures. I've learned that the proposed bankruptcy court modification legislation is stalled in congress. In fact, 41 republican senators are holding firm in opposition to the bill - and as long as there are at least 41 senators in opposition, a filibuster can be applied to stop it. What this means for the housing market is simple....millions of homeowners on the brink of foreclosure who might have had their loans modified in bankrupcty court will now be foreclosed upon in the coming months and leading into 2010. This - combined with the existing backlog of foreclosures that didn't hit the market yet due to the Q1 moratorium, - will result in a considerable increase in supply for the remainder of 2009.
So, unless the Feds do something stupid like creating another moratorium, all the pieces are in place for the "perfect foreclosure storm" of 2009 to hit late this spring, and last throughout the remainder of the year. And if interest rates start to inch upwards, we could be looking at a storm every bit as bad as what happened in 2007-2008.
