Foreclsure News - from Santa Cruz and Beyond
April 15, 2008
I drive my wife crazy with my singing - and not in a Marvin Gaye kind of way. One thing I like to sing to her to wake her from slumber is Good Morning - my rendition is especially horrible and all I really know is the chorus part. But hey, I still think it’s better than a nasty alarm buzzer. And it is also better than getting woken up by the morning news, especially in these dark days.
You may have heard this one on the drive in to work, or perhaps they were bantering about it on NBC’s Today Show or something:
[From Bloomberg.com: Worldwide]
U.S. foreclosure filings jumped 57 percent and bank repossessions more than doubled in March from a year earlier as adjustable mortgages increased and more owners gave up their homes to lenders.
Yeah, good stuff. That’s what you want to hear as you write out your next mortgage payment check!
Of course, you know the famous saying - all real estate is local. What’s happening in Peoria isn’t really all that germane to what’s happening in bucolic Santa Cruz. So what is going on in Bucolic Santa Cruz? Read on:
[From Median home price drops to $650,000 - Santa Cruz Sentinel]
The switch pushed the median price of a single-family home down in March to $650,000 from $682,500 in February — but not as low as $599,000 in January, when 33 percent of homes sold for less than $500,000. The median is the mid-spending point of what sold during the month.
Only 75 homes sold in March, the fewest number of sales for a month in 11 years, an indication of buyer reluctance despite lower list prices. The previous low — 143 sales — was set last March.
That’s an interesting article, and it has more sales data from the aforementioned Gary Ganges, who I talked about briefly in my blog entry from yesterday. According to the article:
Ganges doesn’t specifically track REOs but he found 12 of the 28 homes sold in Watsonville in January, February and March were bank-owned.
Only 12 of 28? Hmm, that seems a little low to me. I do specifically track REOs, all the time, because that’s where the best bargains are to be had, and I’m always looking to find my clients the best deal possible. I just did a search, and I looked at all closed sales since the beginning of the year (up til now, mid April). I included Watsonville and the outlying areas (but not north Monterey county), and counted houses, condos, and multi-residential properties (actually, I don’t think any multi-res sold in that time period). My findings?
There were 35 sales of such properties since the beginning of the year. Of those, two were short sales, and twenty-two (22!) were bank-owned REO real estate. Actually, I’m surprised the number isn’t a bit higher. It should be noted that a few of the others that sold were in the city of Watsonville’s affordable housing program, and there was one Measure J property.
Sigh. Welp, I’m off to my office meeting. Keep up the good work everyone!
Posted by SantaCruzBroker at 7:54am
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Is it safe to buy a house in Santa Cruz yet?
March 26, 2008
I get questions like that all the time. Are we near the bottom? Have we hit bottom? How low will prices go? When will the market turn around? Good questions. Where to go for answers?
There’s just so much contradictory information, isn’t there? For example, our good, reliable, always-faithful friends at the California Association of Realtors (C.A.R.) report:
C.A.R. reports sales decrease 28.5 percent, median home price falls 26.2 percent in February
LOS ANGELES (March 24) – Home sales decreased 28.5 percent in February in California compared with the same period a year ago, while the median price of an existing home fell 26.2 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.
But then we have this little tidbit which I saw splashed on the front pages of various newspapers the other day:
U.S. Economy: Existing-Home Sales Rise, Prices Fall
March 24 (Bloomberg) — Sales of existing homes in the U.S. unexpectedly rose in February as prices fell by the most in four decades.
There are other data points we can look at - for example, check out this entry from the Countrywide Foreclosures Blog:
14,413 REO’s Offered For Sale on Countrywide Financial’s Website
Total REO Asking Price: $2,976,805,967
(As of March 24, 2008)
Sounds like a lot of REOs - but look at the chart - the inventory is going down.
If you’re ever in need of a good a laugh, I recommend stopping by the Calculated Risk blog. It’s always a riot. They’ve got a bit of input on the New Home Sales numbers as reported by the Census:
[From More on New Home Sales - Calculated Risk]
There are actually two pieces of good news in the report. First, inventory levels (even accounting for cancellations) are clearly falling….The second piece of good news is revisions. During periods of rapidly declining sales, the Census Bureau routinely overestimates sales in the initial report - and then revises down sales over the next few months. In this report, sales were revised up slightly for November (from 630K to 631K), December (605K to 611K) and January (588K to 601K). This is actually a positive sign that New Home sales might be nearing a bottom.
So, what, exactly, does it all mean? The honest answer is, nobody knows. I’ll tell you what I think, though. I think that, barring any major, protracted recession, we are at or near the bottom of the market. I think Watsonville and the south county area is at the bottom and may already be heading up a bit - North Monterey county, too. I think that in the rest of Santa Cruz county, prices may have a bit to fall yet, but not much.
In short, I do think it is now “safe” to buy real estate in Santa Cruz county. We may not be at the bottom of the market in every nook and cranny of our diverse area, but I believe we’re close. My feeling is that anyone who buys today will not lose their shirt (and hat, and coat, and…), as many people did who bought in 2005 and 2006. I think worse case, if you buy today, you might lose a sock. Maybe a shoe, too. However, barring any calamity in the economy, I think now is a great time to buy in Santa Cruz. Mark my words. Unless I’m proven wrong, of course, in which case, forget everything I just said. 
Posted by SantaCruzBroker at 6:07pm
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Watsonville Foreclosures Meet the Press
March 03, 2008
Hey, I’m famous! Kind of. On the eve of our tour down to Watsonville to look at some REO foreclosure opportunities, I got a call from one of the staff writers for the Register Pajaronian. He asked if he could come along on the foreclosure tour. I said sure, no problem…
[From the Register Pajaronian - Foreclosed homes lure investors to local tour ]
Members of the Santa Cruz Real Estate Investment Club took a whirlwind tour Saturday through Watsonville, looking at six properties placed on the market as a result of foreclosure.
OK, so it’s not Sixty Minutes. But everyone has to start somewhere. The reporter from the RP (David Carkhuff) was very nice guy, visited a couple of houses with us, took some photos, and went on his way.
The Foreclosure Tour itself was pretty fun, and the folks who came along seemed kind of surprised at how cheap everything was in Watsonville. Afterwards, there was a debriefing back at Thunderbird Real Estate’s office, and a comment was made that prices aren’t quite there for investors yet.
Well, that’s as may be. However, from everything I have heard and read, most professional investors never pay list price. They may write up 10 or 20 offers for each one that actually gets accepted. I don’t know that you’d need to write up 20 offers to get a decent price on a place in Watsonville, but It’s true that the asking prices are not quite to the point where they are obviously a screaming deal for a true, pure investor. But they are very close, and in many cases, it’s possible to negotiate a price down to the point where it does make sense.
There were recently a couple of listings in Watsonville where the asking price did make sense to investors - and those properties sold in under a week. That’s the thing - when something is blatantly cheap like that, don’t expect it to sit on the market long. There is money around, but it’s smarter money than it used to be. It’s also faster moving money, so if you want to take advantage of this market, you’ve got to be fast moving, too.
Posted by SantaCruzBroker at 6:06pm
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Short Sales - Salvation or Scam?
February 29, 2008
Unless you’ve been living under a rock, or unless you pay no attention whatsoever to the local Santa Cruz Real Estate market, you have heard the term Short Sale. If you’d like to familiarize yourself with short sales a bit, I suggest you get my Santa Cruz Foreclosure Report. In a nutshell, though, a short sale is when a homeowner needs to sell their property, but the property is now worth less than the amount that is owed on it.
Short Sales have kind of been marketed as a panacea to Realtors to bolster their flagging businesses. There are short sale gurus out there all over the place selling seminars and CDs and books to Realtors on how to do short sales - I spent a weekend in one, and actually it was pretty interesting. Also, short sales are being marketed to home owners in distress as a way to avoid foreclosure, which can be absolutely disastrous on one’s credit report.
But there is a growing chorus of voices saying that Short Sales are not all they are cracked up to be. Realtors are getting burned out by loss mitigation departments who are uncooperative, buyers are turned off by the uncertainty and delay that is involved with a short sale, and of course, sellers are often totally burned when they cannot complete their short sale and get foreclosed on, which is happening a couple of times per week at least in Watsonville right now.
Here’s an interesting bit I read on short sales on about.com:
[Short Sales Are No Bargain for Buyers - 11 Reasons For Not Buying a Short Sale]
It’s an interesting read, and talks about why you, as a buyer, might want to avoid short sales. One of the touted benefits of short sales is that the buyer can get the property at below-market prices. This article claims that is not true - the lenders will let the property go for less than is owed, but not below market price. From the article:
Lenders aren’t naive or unaware of the value of a home. Lenders will insist on a comparative market analysis, known as a CMA, or broker price opinion, known as a BPO. If a lender believes a better price can be obtained by taking the property back in foreclosure over a short-sale offer, the lender may hold out for a higher price. That price will be close to market value. Lenders accept short sales when the home is worth the short-sale price, which means market value.
From the Realtors that I have talked to who have actually done short sales, there is a difference of opinion on this. Everyone agrees that a lender will get at least one, or perhaps two, BPOs on a short sale property. However, some Realtors say that lenders will discount the BPO amount by a certain percentage - somewhere between 10 and 20%. Other Realtors say that lenders don’t do this, that they always want the full BPO price for the property.
I suspect the discrepancy lies in the lenders that are being dealt with - each is different. What’s more, I suspect that even within a lending organization, the loss mitigators are different, and some may be more hard-ass than others, or more experienced, or less experienced.
The fact is, there really are not that many Realtors around Santa Cruz who have a lot of short sale expertise. How do I know? Well, I look at how many short sales have actually been completed, and it’s not a whole heck of a lot of them. The buyer’s agent basically has little to do in this process - it’s the seller’s agent that has the most to do, by far. The buyer just has to sit there and be patient. I’m in a short sale purchase right now, and we were told it’d be about a month until we got a decision from the bank. We’ve just been sent an addendum asking for an additional month.
I got this addendum a couple of days after I read an interesting blog entry over on ActiveRain:
[From Real Estate Blog - Virginia Short Sales are FAKE. Only 5% Close.]
Most Short Sales are what I call “FAKE listings.” Only 1 in 20 sells. In Arlington only 3 have sold out of 65 attempts….The Theory Behind Short Sales: Banks would be better off to accept a loss now, versus going through the legal expense of a foreclosure, just to end up selling it for less later. Win win, right? Wrong.
Read the blog article. Interesting, right? Well, you might say, that’s Virginia! This is Santa Cruz! Well, that’s true, except that Countrywide, US Bank, HSBC, Deustche Bank, Wells Fargo, Citibank - I think these companies do loans in both Santa Cruz and Virginia.
Anyway, if you ask my opinion, I think it’s OK to try and buy through a short sale process if the property in question is one that you really want to buy. It helps if the seller has already had an offer that maybe didn’t come together, and that they are in contact with the lender’s loss mitigation department and have perhaps worked out an agreement with them already, and you can just walk in, furnish the missing contract, cash, and loan, and be on your way. Other than that, you’re probably much better off finding a nice bank-owned REO property, or (suspend your disbelief here, just for a second) buy a house from a buyer who isn’t totally distressed and facing foreclosure.
Posted by SantaCruzBroker at 12:24am
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Watsonville Foreclosure Tour
February 26, 2008
No, we won’t have a cool bus like the guy in Stockton did as seen on 60 Minutes. But here’s what we do have: a bunch of folks interested in buying some investment-grade real estate down in Watsonville. We’re going to meet at my office in Capitola on Saturday, March 1 at 11 AM, and then make our way down to Watsonville. So far, most of the folks who are coming along are from the Santa Cruz Real Estate Investment Club, which I mentioned a few blog entries ago. If you’re not a member, this might be a good chance to meet some of the people involved and see if maybe you’d like to join too.
We are going to see about a half-dozen different REO properties that are presently for sale, all of which represent good opportunities for investors. I just spent the last hour or so going through every house and condo listing from Larkin Valley down through Watsonville, and I found that there are seventy listed REOs in that area.
Most of these REOs are not what I’d call investor grade - most of them are consumer grade, which is to say, they are priced for owner-occupants, not for investors. Investors need to pay less than retail consumers, because a true investor is looking for cash flow with a relatively small down payment - that is, he’s looking to actually get a return on his investment month to month, just as if he had it invested in an IRA or something.
But there are a few investor grade listings out there, and that’s what we’re going to be seeing this coming Saturday, March 1. If you are interested, just meet us outside my office at 3555 Clares Street (Suite WW) - next to the Fresh Choice Restaurant. We’ll probably want to carpool, but if you want to follow along, that’s fine - we will make copies of the properties we are going to see, if you have a GPS unit in your car or know Watsonville well, feel free to drive by yourself and just meet us at each property in turn.
I hope you can join us!
Posted by SantaCruzBroker at 9:02pm
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