Foreclosures, Moratoria and MBPosted on Friday, October 15th, 2010 at 4:02pm.
"Foreclosures? There are no foreclosures in Manhattan Beach," said the agent.
We didn't quite believe him. Though foreclosure-search technology and data were hard to come by then (and our modem was a dial-up), we had access to some data about homeowners in distress and actually knew someone whose business was to "rescue" such folks and resell their houses for a profit. Certainly there were some foreclosures in MB.
We never found a good foreclosure (though we did buy a distressed property that we found ourselves). Still, that agent's response always hung with us.
Foreclosures have been all the rage recently, making up one-third to one-half of all home sales in parts of California in recent years. But markets like MB seem to have had only a smattering of them. Was that long-ago statement by that agent right, even a decade later?
This week's news is full of hand-wringing over foreclosure moratoria. Bank of America reluctantly decided to impose one on itself, copping to lousy paperwork management. Other lenders are following suit.
But soon you got the hue and cry from market watchers and, no less, President Obama, who says stopping foreclosures is a terrible idea.
Really? After all that talk about slowing down foreclosures and keeping underwater homeowners in their homes to stabilize things? (See MBC's "More Foreclosure Prevention" from this past March.) One expert quoted by the LA Times now says:
The real danger here, a serious danger to the economic recovery and a housing recovery, is some blanket, nationwide foreclosure moratorium.A primary concern here is that buyers will stop buying. If up to 40% of your real estate sales these days are foreclosures, and that pipeline dries up, what next? And if banks put off the inevitable, it just takes that much longer to work through this particular housing crash.
This is all interesting on the statewide or national stage, but, again: What about MB?
Foreclosures are a nearly insignificant portion of sales in MB.
Indeed, researching a new column for the Daily Breeze (coming Saturday), your blog author looked at several South Bay real estate markets and found much the same story. In PV, San Pedro, all the beach cities and Torrance, you see very few sales coded as REOs – bank-repossessed properties. Only Carson looked like other hard-hit markets of California, with almost 40% of recent sales being REOs.
(Data note: Searching for REO sales as coded on the MLS isn't going to give a complete picture of foreclosures, but it's useful data regardless.)
When we look at REOs, actual foreclosures taken by the bank and put up on the open market, we see failed speckies mostly – late-bubble or post-bubble builds that just didn't work out. Underwater homeowners mailing in the keys? Not a lot of those.
Now, we're not seeing the whole picture looking at MLS data. It's a start. For instance, if an investor grabs a foreclosure to resell, that doesn't always get coded as an REO. (2612 Poinsettia and 801 11th fit in this category; they also haven't sold yet.)
Are there homeowners in distress around town? Surely.
Remember a year ago when Blake Roberts posted a list of homes in default – the first stages of foreclosure – and MBC wrote up some that had been on the market recently. (See "More on 'Foreclosures' in MB, Part I,' and "Part II.") Blake's list had 81 separate properties on it; we wrote up a couple dozen. Some of those transacted off the public market and therefore off the MLS. Many more, we suspect, were rescued one way or another.
It'd be interesting to follow up Blake's old post (it's off his site now) by looking at newer data, but the bottom line seems to be that foreclosures remain a small part of the local market. Just like that one agent said so long ago, but we can still hear it.
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