While a 93.1% YOY increase in San Francisco “Notice of Default” (NOD) activity last quarter sounds quite dramatic, in absolute terms it still represents relatively few properties (334). But the number is growing. And as is happening statewide, we’re seeing an increase in the percentage of notices that end up being bank owned.
Of the homeowners in default [throughout California], an estimated 41 percent emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. A year ago it was about 71 percent. The increased portion of homes lost to foreclosure reflects the slow real estate market, as well as the number of homes bought during the height of the market with multiple-loan financing, which makes ‘work-outs’ difficult.
Within the greater Bay Area, Contra Costa hit a record level of Q4 default activity (3,805 notices, up 151.8% year-over-year) as did Sacramento (5,807 notices, up 120.4% year-over-year). And neither Alameda (2,573 notices, up 119.4%) nor Santa Clara (2,162 notices, up 147.4%) were too far behind.
Most of the loans that went into default last quarter were originated between August 2005 and October 2006. The median age was 22 months, up from 15 a year earlier, indicating that the pool of at-risk home loans is getting larger.
And as we wrote nine months ago, “keep in mind that long-term interest rates remain near historic lows, and according to most, the Bay Area economy remains strong (and incomes are up).”
∙ California Foreclosure Activity Still Rising [DQNews]
∙ Bay Area “Notices Of Default” Heading North? (So To Speak) [SocketSite]
Calculated Risk quoted an apt excerpt from the Wachovia investor conference call today:
“Part of one of the challenges is, and we’ve mentioned this before, a lot of this current losses have been coming out of California and it’s — they’ve been from people that have otherwise had the capacity to pay, but have basically just decided not to because they feel like they’ve lost equity.”
Anybody seen any research on the numbers or percentages of foreclosures (local or elsewhere) by owners who can pay but chose to walk away? That this was specifically mentioned on the earnings call by a major bank would lend one to believe it is a not insignificant trend.
could someone explain why the fact that the median age of loans going into default is older than a year ago means the pool of loans at risk is getting larger? Couldn’t it mean we’re working past the worst of the lending excesses in 2005/06, (and that loans made in the past year PERHAPS were more safe and conventional?). I’m no expert…just trying to understand the dataquick news release.
It is a confusing statement. The median age is (of course) the number at which half the defaulting loans are older and half are younger. Thus, if the median age is getting older, it indicates the overall POOL of loans at risk is getting larger — because it encompasses a broader range of time-of-loan. It would not necessarily mean the actual number of defaults is growing — but we see here that it is, by leaps and bounds.
thanks trip!
I would just like to take a moment to thank those buyers who outbid me in the summer of 2006 on the 3 properties that sold for over-asking, which subsequently convinced me that “now” is/was not the time to buy. Happily renting and counting my cash.
Eddy, yes for the past few years renting has been an outstanding deal in San Francisco.