Boosterism and December Foreclosures

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The Union-Tribune's latest monthly housing data wrapup features a parade of industry types saying that now is the time to buy. A few of them acknowledge the inventory glut, but not a single one happens to note that homes are still far too expensive in comparison to rents and incomes.

This continued overvaluation is the root of the problem with our local housing market, and now that home prices are no longer being artificially supported by speculative enthusiasm and overly loose lending, there's little reason to expect them to stop falling until they are back in line with the fundamentals. Yet it would seem that we have people lining up to tell the public that it's a great time to buy a home.

Moving on, let's take a look at something else being ignored by the housing cheerleaders: the continued sky-high foreclosure rate. The Daily Transcript, my usual source for this info, skipped a month of reporting on foreclosure data for some reason, but now they are back with a report on December foreclosures (subscription required) so it's a good time to check back in.

The graph to the right shows that the numbers of both Notices of Default (NODs, which indicate that a borrower has gone into default) and Notices of Trustee Sale (NOTs, which are sent about three months later and indicate the bank's intent to repossess the home) rocketed upward in December to new all-time highs. However, this move is probably deceiving. The number of NODs and NOTs dropped precipitously in November before spiking in December, and I doubt it's a coincidence that the November and December figures average out to be pretty much identical to the October figures. The December rise is probably more indicative of some delay that caused a huge number of notices to be pushed from November to December.

So foreclosures are probably accruing at about the same rate they have since the summer. This may not be as bad as it looks on the graph, but it is still far in excess of the foreclosure pace that we saw during the 1990s housing bust.

The Transcript article also featured an intriguing little tidbit on a study performed by local realtor Joseph Galascione:

ERA® Metro recently released a local study, lead by Galascione, that among other things, analyzed San Diego County deeds of trust. The study found that of the 8,052 loans scheduled to adjust in the first six months of 2008, nearly half were considered high-risk, those that have a loan to value ratio above 80 percent. The majority of these high-risk loans are scheduled to reset between April and June.