Okay..I’ve had some request for foreclosure data specifically regarding our local areas. As I was crunching this data today and working on the charts, I was checking the MLS for new homes for buyers. As I pulled 14 listings for a buyer today, 3 were designated as short sale attempts.
I can say that is not surprising. While, we are not having foreclosure problems like Florida and Nevada, we do have issues here. I didn’t start tracking foreclosure data until March of 2007 so this chart does not show Jan and Feb. From March 2007-December of 2007 there were 479 foreclosure notices served for Salem homeowners. From March 2008-December 2008, there were 586 notices recorded. This is a 22.3% increase in one year.
I know you are all reading this post for the pretty graph, but here is some 2008 foreclosure trivia for Salem for you.
- The shortest time from purchase to default…111 days. Considering that the first mortgage payment is paid at close. This buyer purchased a house and then never made one payment. That is wrong on so many levels…
- The average mortgage amount owed on these foreclosures for 2008 was $160,002.
- It took on average 2017 days (5.5 years) from purchase to foreclosure notice.
- Only 15% of the NOD’s served (Notice of Default) were then served with a Notice of Trustee’s Sale. That means people were able to get their homes sold, modify the loans, give the house back to the bank or create another arrangement prior to a foreclosure auction. This is pretty consistent with my experience that there aren’t a lot of foreclosures on our market, compared to other parts of the country.
- The top three years that homes were purchased and then went into foreclosure…drum roll…2004 (77 served), 2005 (131 served), and 2006 (167 served).
Now…as some of you may have read…Oregon is expected to have a $2 billion dollar budget shortfall. The state economist is expecting Oregon’s economy to reach its worst in the second half of this year. What this means is that we are going to see more job losses which will increase our foreclosures. I would expect 2009 to see another jump in foreclosure notices. This will help to push down prices as buyers are continually asking me about purchasing a foreclosed property or a short sale.
I encourage all buyers and sellers that are interested in a short sale to make sure that your agent has knowledge about them. Short sales are more complicated transactions and they are not easy. That is for another post though…
Wait, we haven’t seen the worst of it… I am especially concerned about the impact of foreclosures on the many small business owners who accessed cash by borrowing against the equity in their home to fund their businesses. These borrowers will find the “resets’ on their ALT-A, Option ARMs, and Interest-Only mortgages will spike and make the payment to high to afford.
It is a tragedy when an individual borrower defaults on the mortgage and loses his/her home. The tragedy is magnified when the borrower is a small business owner, employing from 1 to 10 employees. The loss of jobs related to mortgage defaults and the resulting business failures will further weaken our economy and prolong the recession.
Many fail to realize that there are millions of self-employed smaller businesses, who employ from 1-10 employees, that are holding the mortgages that are going to reset in 2009 through 2012. Many experts believe that this will constitute the 2nd Wave of Foreclosures that will dwarf the Subprime Mortgage Crisis. The tragic aspect is that these borrowers are Prime and Near-Prime borrowers who hold ALT-A, Option ARMs, Interest-Only mortgages. There are $1 Trillion ALT-As, and $500-600 Billion Option ARMs.
So, here we have a major problem… Not only will these small business owners lose their homes, but there will be the resulting JOB LOSSES on their business failure. Note, although President-Elect Obama is stressing the need to create 3 million new jobs, we must understand that “JOB RETENTION IS AS IMPORTANT AS JOB CREATION”.
An NASE Survey sheds light on this critical issue. The NASE survey is at
http://advocacy.nase.org/research.asp. See the NASE News for the Survey on Toxic Mortgages.
According to this survey, it is estimated that 3,709,800 small business owners hold Alt-A and other toxic mortgages, and 1,279,800 are already delinquent as they have missed one to three or more monthly mortgage payments at mid-November, before the expected Resets that are scheduled to begin in 4th Quarter 2008 through 2012.
Washington believes that Loan Modifications will work. Fo some it may, but the rate of Re-Default will negate the loan mods. How can we expect the Borrower to fulfill his/her financial obligations without any understanding of informed financial decision making. If conditions return to where they were, we can expect a return to excessive credit card usage and the same financial ignorance that led up to this crisis.
It doesn’t seem that Washington has any clue of the level of financial distress that is just around the corner.
I agree professor. 2009 will bring more ugliness our way.