Distressed Inventory Report 12-5-09
The numbers are showing a definite up-tick in the amount of foreclosed inventories and the NTS/Foreclosed homes. East Bellevue as usual has some odd numbers. The amount of distressed homes rose to a high of 106 but the NTS/Foreclosed ratio fell to 1.00. However the overall amount of distressed homes is rising. West Bellevue held steady with 69 distressed homes and the NTS/Foreclosed ratio stayed the same at .91667. South Bellevue saw both its number of distressed homes rise to 52 and the NTS/Foreclosure ratio also rose to 1.26. This is the first market in the last week to have more homes being NTS than foreclosed. As has been discussed before, this means potentially a rising number of foreclosed inventory overall as the system is being feed with a larger number of homes which have their notice of Trustee Sale (NTS). Theoretically as long as there are more homes with a NTS than foreclosed homes the number of bank owned homes will continue rising. If there are less NTS homes than foreclosed homes eventually the number of foreclosed homes will decline. The other factor is the rate of sales. Sales volumes are declining, probably for seasonal reasons while the number of foreclosed homes and NTS homes being brought to the market is slightly rising. In East Bellevue in August of this year there were 10 new homes that went NTS; however the market was absorbing inventory and the next week the amount of homes that were NTS actually declined to 65. Effectively this was a drop of 10 homes which sold. This indicated a high volume of sales. If you look at the Altos research market activity index this trend is confirmed because the index was in a full upward trend. Now you can see the market activity index falling, indicating falling sales volumes which is why I think we are seeing the results that are occurring now. The most interesting trend however is that overall inventories are declining while the number of distressed homes overall is rising. In my opinion this indicates that pricing and market conditions have not improved enough to bring the “discretionary” sellers to the market. Barring a new round of layoffs locally it looks like overall there will be fewer homes to select from in the spring. In another blog post I will discuss where I think the last round of layoffs will occur that need to be absorbed locally in 2010.
As we discussed earlier there is a buying opportunity in the near term with rising bank inventories overall, even if they aren’t listed. Banks need to sell even if it doesn’t seem like it when you make your offer. Again the Altos numbers confirm this near term trend as you can see values peaked in October and have been in a decline since. Given a near term slow down in sales volume and bank inventories this could keep values at a lower level for the next couple of months, however overall the decreased inventories will put a floor on prices so seeing a situation that happened last year with small sales volume and ballooning inventory and as a result plummeting values doesn’t look like it is in the cards. However there is nothing to drive prices up. The theories of Option Arm time bombs and readjustments causing another large down leg will help to keep values low but if the inventories remain low these homes will be absorbed by the market in the next two years.
What is interesting in this cycle is how quick employers were to cut jobs and how the lenders were totally unprepared to handle the wave of foreclosures. Employers can’t keep cutting jobs forever, especially if the global market keeps growing. However there is nothing driving up wages and salaries and there are large disincentives for employers to hire given the legislation proposed in congress. Looks like we are going to get drug along a sharp rocky bottom.
Here is the link to the spreadsheet. Bellevue Foreclosure Report 12-5-09