It’s Saturday, the Arizona Republic‘s favorite day to piss on the real estate market. Today ace reporter Catherine Reagor informs us that foreclosures are up. “By how much?” you ask. You don’t read the Republic much, do you?
Instead of actual numbers we get all manner of obfuscation, scary anecdotes, out-of-context statistics and quotations from authorities of dubious authority.
But if you wade your way to the eleventh paragraph, you get to the real numbers. How many foreclosure auctions last month? One-hundred-thirty-three. An additional 1,186 homeowners got trustee notices, which means that if they don’t sell, refinance or catch up on their payments quickly, their homes will be auctioned.
I cannot tell you with certainly how many owned domiciles there are in Maricopa County. A million, at least. I feel bad for the 133 families who lost their homes in foreclosure auction, but I expect more homes than that burned down last month.
In other words, the change in the rate of foreclosures is interesting only because our foreclosure rate has been outrageously low over the last two years.
Why are newspapers dying? How about because they refuse to tell the whole truth…?
Technorati Tags: arizona, arizona real estate, phoenix, phoenix real estate, real estate marketing
Jeff Brown says:
In my experience, truth is but another tool newspapers use when deemed expedient. It can always be cleverly buried when inconvenient and unavoidable.
This would be an excellent time for a certain Republic columnist to have some fun with the real truth. What do you think?
November 25, 2006 — 11:09 am
Kaiser Sose says:
I think it was an accurate article. Foreclosures are increasing and, like you stated, so are the trustee notices. When the homeowners with the notices cant get out of the hole they are in, they will go into foreclosure. The article also mentions all of the ARMs that are resetting and how people are having difficulty making the higher payments. Many more ARMs are coming due next year, so that will only exacerbate the problem.
If you don’t think the article is telling the truth (or your version of it), then perhaps you can share some hard data with the rest of us so we can understand why you disagree with it. Instead, all I see is market cheerleading with no facts at all.
November 25, 2006 — 11:38 am
Joe says:
>I feel bad for the 133 families who lost their homes in foreclosure auction,
>but I expect more homes than that burned down last month.
OK, see, Greg, this is why people hate Realtors, because they take obvious bad news and try to minimize, spin, ignore, and otherwise convince others of the complete opposite.
And true to form, instead of concentrating on the important piece of news in the story (the 1186 number) you instead focus on the 133 that were auctioned. As if that were somehow the sole barometer of how things are going. Just because other foreclosures are not auctioned off is meaningless. The fact that 1186 people are receiving trustee notices IS INDICATIVE OF EMBEDDED ROT in the local housing ecosystem. The fact that FORTY PERCENT of foreclosures is due to ARMs is ignored by you, never mind that we have YET to see the vast majority of ARMs reset (which will happen in 2007). The fact that the TREND IS WHAT MATTERS.
But, no, by all means, continue to blow smoke.
November 25, 2006 — 3:16 pm
Greg Swann says:
If the numbers were actually bad — objectively bad, not comparatively — they would have been in the second paragraph, not the eleventh. Fourteen months after the market turned, we have only 133 foreclosure auctions among a million homeowners. I read this as good news. No one has any idea how many option ARMs are still in play, because thousands of people have refinanced one or more times since they took out an option ARM. There is a reason real-life results are never as bad as BubbleHeads foretell: Markets are dynamic, not static.
November 25, 2006 — 3:48 pm
Joe says:
Um, excuse me?
>There is a reason real-life results are never as bad as
>BubbleHeads foretell: Markets are dynamic, not static.
Thank goodness for the Google cache — I can come back to this post in the future to save me a lot of typing.
Just because the market doesn’t crash as quickly as the “Bubbleheads” predict doesn’t mean that they’re always wrong, as you indicate above. The 2001 stock market crash was EVERY BIT AS BAD as the pundits said it would be, Greg. They were also right about the 1998 panic involving Long Term Capital Mgmt. They were also right about Orange County’s default by using derivative investments.
Just because they were wrong on timing doesn’t mean they were wrong, period.
And your statement about “nobody knows how many ARMs are still in play” is completely farcical. Not only do banks know, they’re REQUIRED TO KNOW BY LAW, they’re just not required to document it in all cases. Absence of proof does not equal proof of innocence, Greg. There’s NO FREAKING WAY that 1.8 TRILLION dollars worth of ARMs just went away due to refinancing.
But once again, let’s go with your off-the-cuff armchair analysis to see how quickly it falls apart. Let’s say that Americans got the message and refinanced en masse last year. Not only would that have shown up in record bank and loan originator earnings reports due to fees (which it didn’t), but mortgage bankers would not be laying personnel off in large numbers (which they are) and risk premiums for the credit default swap markets wouldn’t be rising (which they are).
It doesn’t matter what the actual number is, Greg. What matters is that the number is friggin BIG. And it’s gettin’ bigger, not smaller.
November 25, 2006 — 4:59 pm
Jeff Brown says:
Joe – This market is a growth market compared to the carnage that took place in the early to mid-90’s due to the S & L crisis. I do business in three states, but live in San Diego which was, hands down, the worst hit county in the country at that time. This was due to the simultaneous loss of two giant employers, who left the state for greener pastures.
If ARM’s were going to cause massive foreclosures it would have been then for sure. Of course, it didn’t happen. And back then the decreases in median prices were staggering compared with today’s mild correction. It was double digit all over SD county.
It might surprise you to learn that foreclosures on fixed rate loans far outstripped forclosures on ARM’s. Why? For two basic reasons, both of which are in play today.
1. The monthly payment on the ARMs were substantially lower than the fixed across the street. As long as it wasn’t about to adjust, the homeowners had it better in the bad times then fixed rate borrowers.
2. If the ARMs were about to adjust, the homeowners took an IQ test, and if the results showed three digits BEFORE the decimal point, they refinanced. And their payments fell – again.
The market came back, their homes resumed their old value, and passed it up in no time. Remember, those days were much worse than what we’re facing now. No comparison. The loans available now to homeowners with ARM’s, or even fixed rate loans, are easy to come by as long as credit is ok or better, they’re employed, and they have a pulse.
Those few who find themselves unable to refi either have poor credit, shouldn’t have bought the home in the first place, or exercised their poor judgment in some other way.
You’re not responsible, nor is their Realtor, or me, or Greg, or you for that matter. Poor decision making has consequences just like good decisions do. It’s the way life works.
Like I’ve said for years – “About the time you got the old mare to work without eating……she died.”
November 25, 2006 — 5:14 pm
Joe says:
> …but live in San Diego which was, hands down, the worst hit county
>in the country at that time.
Yeah, I remember that. Totally sucked.
>If ARM’s were going to cause massive foreclosures it would have been then for sure.
>Of course, it didn’t happen.
…snip…
>It might surprise you to learn that foreclosures on fixed rate loans
>far outstripped forclosures on ARM’s.
Actually, it doesn’t surprise me. I think the thing you’re leaving out, Jeff, is that ARMs and their more insidious cousins the “Option” ARMs were a _FAR_ smaller part of the pie back then than they are now. Back then, ARMs were not marketed as the “affordability tool” that they are now (which is why I keep telling people that there’s no housing bubble – it’s a CREDIT BUBBLE that we need to be worried about).
Again, go back to the facts: there’s easily 1.5 to 1.8 TRILLION dollars in ARMs out there right now that will reset over the coming 18 months. That should scare the s#!t out of people, period.
In some places, ARMs make up 40-60% of the loans originated in 2004-2005. Again, holy crap.
This is why both of your 2 reasons above are not at all comforting (or even really appropriate) for today’s market.
Reason #1 is wrong simply because of what I stated above – these loans _are_ about to adjust, so those borrowers are not going to have it better than the fixed rate folks across the street (and today’s fixed rates are lower than they were in the early 90s).
Reason #2’s problem is that people who took out ARMs in order to stretch into houses they couldn’t afford in the first place _already_ failed the IQ test, so when they go to refinance they’re going to find out that they have no equity to refinance with. Thus, they will be stuck with their loans, and will either have to struggle to make the note or give up.
I totally agree with you, by the way, that this is all their own fault. I think the Fed agrees too, which is why there will be no rate cuts in order to bail them out, which will only exacerbate the problem.
November 26, 2006 — 10:21 pm
Joe says:
>If the numbers were actually bad — objectively bad, not comparatively —
>they would have been in the second paragraph, not the eleventh.
Oh come on, Greg. You _seriously_ believe that?
>Fourteen months after the market turned, we have only 133 foreclosure
>auctions among a million homeowners.
In ONE MONTH, Greg.
And like I said, that’s just the AUCTIONS. Hardly a comprehensive measure of the total foreclosure/short-sale/REO/etc. activity in the local market.
The fact that 1186 trustee notices went out in a month is just tragic. There’s no way you can counter-spin that.
>Instead of actual numbers we get all manner of obfuscation, scary anecdotes,
>out-of-context statistics and quotations from authorities of dubious authority.
There you go again, with your pithy holier-than-thou attitude and the “I’m the one with all the REAL knowledge” grandstanding.
Quote #1 from the story is from Margie O’Campo de Castillo of Arizona Dream Realty. What makes her any more “dubious” of an authority than YOU?
Quote #2 is from Jay Butler of the Arizona Real Estate Center at Arizona State University. What’s your problem with him, Greg?
You’re just performing character asassination with no facts to back it up.
November 26, 2006 — 10:31 pm
Joe says:
Although I agree, Catherine Reagor is a total moron.
November 26, 2006 — 10:33 pm
Jeff Brown says:
Joe – I appreciate your comments, but reason #1 still stands. I’ve restated your pertinent response here:
>Reason #1 is wrong simply because of what I stated above – these loans _are_ about to adjust, so those borrowers are not going to have it better than the fixed rate folks across the street (and today’s fixed rates are lower than they were in the early 90s)
I’ll use San Diego as my example. In 2002 a couple paid $250k for their home, with 90% financing, using an Option ARM. The loan readjusts next summer. They read the newspaper and are now trembling. They call me.
We learn their loan will recast at 6.75% at $275K loan balance. Payments: $1784.
Or – They can refi at 6%. Payments: $1650
Or – They can refi with a new ARM for $300K because they want more cash on hand for peace of mind. Payments: $773
Where’s the problem, Joe?
As far as the second reason, not everyone got into their homes by going way above their heads. Since we both agree they created their own problem, enough said.
However, at least a huge minority of these ARM loans about to adjust next year are not out of equity. The owners will be able to refi before the ‘tsunami’ of foreclosures becomes visible from the beach. And you won’t hear the media say oops we were wrong.
Joe, the problem here is that the media has sold the ARM as a plot from Satan. Ironically it will turn out to be the very loan that bails thousands of homeowners out of a potential recast.
What kills me is the twisted logic that says lenders are to blame. Think about the average 80% ARM loan. For every dollar the buyer has invested the lender has four. And yes, the lender’s risk is hedged by the power of foreclosure. But four to one? Do you honestly think they want over a million homes back on their books? Lenders are many things, but unless they’ve all conspired to be stupid together, they’ll be making ARM loans years from now.
The ARM loan has lasted for almost two decades because it works for borrowers and lenders alike. And it will stay around until either or both decide that’s not true any longer.
You’d say that day is coming next year. I think not. We’ll see together.
November 27, 2006 — 12:16 am
Joe says:
>We learn their loan will recast at 6.75% at $275K loan
>balance. Payments: $1784.
>Or – They can refi at 6%. Payments: $1650
>Or – They can refi with a new ARM for $300K because
>they want more cash on hand for peace of mind.
>Payments: $773
>Where’s the problem, Joe?
The problem, Jeff, is in the fact that in 2002 Option ARMs weren’t being used as affordability tools so that uneducated borrowers could buy ever more expensive houses.
Anybody can cherry-pick a single example (as you have done) to try to prove their point. If these loans aren’t so bad, then why are there hundreds of counter-stories about people who took out Option ARMs and are now entering foreclosure (and claiming that they were never told of the full terms)?
It’s because 2002 wasn’t when the groundswell of Option ARM abuse was built. No, that started in earnest in late 2003 and continued through 2006.
The couple you just mentioned are lucky that they have enough equity in their home and a good enough FICO to qualify for that 6.75% re-fi. Many many other people do not.
That’s what worries me, Jeff. Lending standards essentially went out the window over the last few years. We’re about to see the results of that.
I don’t think that ARMs and Op-ARMs are “tools of Satan” just by themselves. They’re great loans for those who actually can use them. People who can’t afford a house without resorting to an Option-ARM loan and can only afford the I-O or neg-am part are not those people.
December 6, 2006 — 7:24 pm
Joe says:
Oh, and by the way, Jeff, the other problem is that these “affordability loans” do exactly the opposite of what they say they do. Since they increase the available demand for houses, they drive prices up. Oh yeah, great way to “increase affordability.”
December 7, 2006 — 12:32 pm
cassiano travareli says:
Well we can only expect it to get worse. Banks are not giving loans, so that gives less homes to be auctioned in the market for foreclosure.
October 10, 2008 — 2:26 pm