Riding in the Short Bus of Housing: Southern California Short Sale Numbers. 1 in 10 Homes is a Distress Sale.
Posted by: in Real-estate newsWe are back in wonderland where losing jobs is apparently good news for the markets. These false rallies will once again lose steam once people realize that reality on Wall Street is very different from daily living on main street USA. In this short article, we are going to drill into the short sales data I have been accumulating since last summer. There are multiple indicators that can give us an idea of where the market will be heading but short sales are such an important factor in determining the depth of price changes and length of the downturn. Employment is another key factor since without a job you will find it difficult if not impossible to make your mortgage payment. Amazingly, the Fed fund rate hasn’t stopped the growth in short sales or foreclosures. In fact, it may be encouraging Ponzi behavior because as we are now vividly aware, folks are more and more willing to walk away from their mortgage obligations. The psychology is such that if a family purchased a home for $500,000 and now realizes they can purchase the same home for $350,000, why not hop into the other home with record low rates and let your $500,000 home foreclose? You can do this while your credit is still intact as I have been hearing from folks since many realize they are not going to get peak prices.
The good news is banks are raising their down payment requirements. At least this will force many buyers to have some skin in the game. Short sales are a significant indicator of market distress because these are homes that are being sold not because of voluntary action but because of circumstantial force. Unlike seasonal fluctuations that hit during the winter and summer months, short sales keep on increasing regardless of seasonal factors. These are based on reality factors and not the Surreal Life of Reality housing gauges. Southern California just crossed a monumental point today. Now, 1 out of every 10 homes for sale is in some form of distress. Since many of you love graphs, I think this graph sums up what we’ve been living through in Southern California:
*Click to enlarge like a subprime reset
Threshold Past
What you’ll notice is that inventory has been steadily declining since late September when it hit its peak. You’ll notice the seasonal decline which occurs every fall and winter. You’ll also notice from the graph the steady progression of short sales regardless of any movements in aggregate inventory. As a telling sign, short sales jumped from 3.3% of the market in July to the current 10.14%. We’ve nearly tripled the number of short sales in 7 months! If you are looking for signals of a market bottom, short sales are an important and crucial indicator. Until short sales slow down, any bottom calling is pointless. These are also important because they reflect the nature of local markets and are based on local inventory numbers. When you think of Real Homes of Genius, think short sales.
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Related Posts:
■The Short Sale Report: Volume 1 – The True Barometer of the Housing Market
■Real Homes of Genius: Today we Salute you Compton with a Short Sale at $375,999. New! Short Sale Search Option.
■The Short Sale Report: Volume 2 – Record 10,000+ Short Sales in Southern California.
■Short Sale Report Volume 3: Another Week and Another Record. SoCal Short Sales up over 12,000.
■The Short End of the Stick: Examining Short Sales in Southern California
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