Foreclosures fall by record amount in November as lenders put brakes on
Foreclosure activity fell by a record amount in November as U.S. lenders put the brakes on repossessions after the uproar over faulty foreclosure practices this fall. But experts said the lull was probably only temporary, and home prices could take a hit early next year as banks begin foreclosing again at a faster clip.
With a moribund market for new homes, constricted lending by big banks and the poor economy dampening prospects for buyers, the housing market in Southern California also weakened last month, according to data released Wednesday. Sales fell 15.5% from November 2009, and home price gains slowed considerably.
“You are seeing reduced sales volume due to high levels of unemployment and because mortgage rates are beginning to increase,” said Jacquelynne Chimera, an analyst in San Francisco who follows the California housing market for investment bank Keefe, Bruyette & Woods. “If you see a flood of supply come back on the market, it’s very possible that could put pressure on home prices.”
U.S. foreclosure activity declined 21% in November from the previous month and 14% from November 2009, according to RealtyTrac in Irvine. In California, foreclosure activity fell 14% from October and 22% from November 2009, the firm said.
Sales of Southern California homes in November fell to 16,208, the lowest level for a November since 2007, according to San Diego research firm MDA DataQuick. The median home price for the region rose to $287,000, a meager 0.7% increase that marked the weakest annual gain since prices began to rise on a year-over-year basis last December.
“The phones are kind of quiet; the buyers aren’t jumping for stuff,” said Leo Nordine, a Los Angeles real estate agent who specializes in foreclosed properties. “The buyers are the smartest people out there — I think the retail buyers seem to have a better handle on what is going on than the economists.”
With lenders already restarting foreclosures that were frozen in October, November and part of December, a surge in repossession activity early next year is likely as big banks begin taking homes back with a “vengeance,” RealtyTrac Vice President Rick Sharga said. He estimated that the U.S. housing market’s recovery would be set back by three months because of the delays involved with the foreclosure fracas.
“The lenders have already announced that they are restarting foreclosure activities, and they are going to have catch-up work to do,” Sharga said. “It is very likely we are going to see accelerated foreclosure rates in the first quarter.”
Several lenders announced partial freezes in October after admitting that they had employed so-called robo-signers — people who legally attested to the accuracy of foreclosure documents without reading them — in the states where the courts oversee the process.
In California, repossessions of homes in November plunged 40% from the previous month and 45% from November 2009, according to RealtyTrac.
Bank of America Corp. said last week that it was lifting its foreclosure freeze and began taking back some 16,000 properties nationally. The bank declared a freeze in October after it acknowledged that it had employed robo-signers.
Bank of America owns a large portion of California’s troubled loans because of its purchase in 2008 of Countrywide Savings, the Calabasas mortgage lender that became the symbol for shoddy lending practices during the boom years. Bank of America is also the largest financial institution in the U.S. and other lenders are likely to follow its lead.
Nordine, the Los Angeles real estate agent, said he had seen an increase in listings of foreclosed properties from numerous lenders in the last two weeks.
“They are starting to give us more assignments, and the sense is that there is going to be more after the start of the year,” Nordine said. “There have been so many properties that have been sitting in foreclosure for two years — they are going to have to just kill them off.”
Foreclosures remain a big part of the sales market in Southern California, although the percentage of foreclosures as a part of the overall resale market has come down considerably since peaking at 56.7% in February 2009. Last month, foreclosures accounted for 35.1% of the resale market, an increase from 34.7% in October but down from 39% in November 2009.
Christopher Thornberg, a principal of research firm Beacon Economics, said sales and home prices in Southern California probably would remain flat next year. Climbing interest rates, the poor economy and the number of “underwater” homeowners — those who owe more on their loans than what their properties are worth — will contribute to a weak housing market.
“It’s a bad thing for a builder trying to make a profit, it’s a bad thing for a homeowner if you are underwater on your property, but it is what it is,” Thornberg said. “It’s a good thing if you are thinking of buying a house in the next couple of years.”
