Foreclosures up 799% in L.A.

We told you the news was crummy today. DataQuick Information Services today is reporting a huge spike in the number of L.A. homes lost to foreclosure -- up 799% from the second quarter of 2006 to this year's second quarter.

A bunch of numbers from DataQuick: Notices of default more than doubled in L.A., rising 127%, but the default problem is much worse elsewhere in the state:
Statewide: Up 158%
Riverside: Up 191%
San Bernardino: Up 180%
Orange County: Up 138%

In a second category, "Recorded Trustees Deeds" (actual loss of a home to foreclosure), L.A. mirrors the state average, with a 799% year-over-year increase:
Statewide: Up 799%
San Bernardino: Up 987%
Riverside: Up 793%
Orange County: Up 646%

One more cheerful thought: During the three-month period measured, banks and lenders took back 2,581 houses in L.A. -- that's about 28 houses foreclosed every day.

Hat tip: Cal
Photo Credit: L.A. Times

Comments

[eprobert]

Another day another foreclosure article.

There are two REOs up the street from me, but they don't seem like bargains. They're on the wrong side (gangbanger side) of the hood, they're dirty though recently remodeled, and are priced right in line with all the other sitting inventory.

I suppose when banks get enough REOs on the books they'll finally start to discount but it doesn't seem to be happening yet.

[Cal]

"Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 17,408 during the second quarter. That is the highest number in DataQuicks statistics, which go back to 1988."

Housing is very slow moving, we went from historic low foreclosures to historic highs in what amounts to warp speed.

The trillion dollar question is how fast they will return to normal, how long they stay at this level or how high they might go...

[Eurotrash]

Banks aren't lowering prices on their REOs because they don't want to lower the overall price level.

Eventually though - if the market continues to fall - the pain from having these non-performing assets sitting on their balance sheets will become too painful and the banks will look to dump them.

When other banks see this, they will likely follow suit and quickly lower the prices on their own REOs. That is when the floodgates could open and we'll see more dramatic price decreases than we have to this point.

Of course all of this will be felt mostly in the lower priced markets surrounding LA. The Westside and other richly priced areas likely won't see substantial price declines until the economy hits the wall or interest rates increase dramatically.

[beacher]

"Of course all of this will be felt mostly in the lower priced markets surrounding LA. The Westside and other richly priced areas likely won't see substantial price declines until the economy hits the wall or interest rates increase dramatically."

So what does this mean for Long Beach. We moved her recently and I can't get a grip on the housing market here. Seems like there's a lot for sale but prices are still very, very high. Is Long Beach a "lower priced market surrounding LA"?

[Mr Income Stream]

Eurotrash-

You're just whistling past the graveyard buddy, you should spend a moment looking at the forclosure sheets before you post. No area is immune not even your precious West Side. You're also wrong about the banks holding the inventory. The banks are just servicers the one's that hold the actual paper and ownership are Wall Street. Once we get past this last quarter. The show is going to get real good. They are going to be dumping that inventory like rocks to build capital. It's going to kill the market as you know it. Just watch...

[Ace]

I read a story (I can't remember where) about how the big banks have outsourced the handling of foreclosed houses to places as far away as India. Because they are not local, they have no idea how to price the houses. Many of the houses are priced at what the would have sold for a year or two ago.

[john]

I left Los Angeles (Arleta) in 1985 before I sold my house in a bad sellers market. My new job was waiting I had to go. My LA realtor didn't have a clue how to market. When I dropped in on an open house he set up for my benefit, I noticed something as people walked through. I asked him who would most likely buy my house and why. He acted surprised and mumbled realtor blabber about staging and chip and dip and basically a dumb look. He said its priced to sell - but no offers. I asked him if I could try to sell it today. He said okay. During the day, several realtors who looked like they were in a Sopranos episode were offering about 20-30% below my asking, and their clients weren't even qualified enough to buy a bicycle. I asked my agent to babysit for a few hours while I did my work. I went to a print shop and printed fliers in Spanish. I bought some brightly colored green red yellow balloons and I picked up a few jumbo packs of tortillas a quart of salsa. I went to a record store and asked for an appropriate selection of a Mexican party record of folks songs. I got back and home and started to work. I asked my agent if he knew an agent who spoke Spanish. He replied and I said if you want to sell this house today, get him here NOW. He complied and the agent showed up just in time for me to crank up the sounds. My house had an intercom in each room - which really worked. I piped the music throughout and asked the agent if he liked the music, He smiled. I told him if he could sell the house above asking I had a $100 dollar bill for him. We waited, I had put the flyers on the windshields of all the cars in the local parking lots. Party - open house--in Spanish. The bait was set and we waited. Within an hour we had over a dozen prospects. The agents ran out of business cards. Well, instead of all the snake in the grass low ball offers we were getting real offers above my asking. I noticed that some of the women would drive back and forth, and would comne back in to tell me. This is my house! I told them we had several offers on the table and I would consider them at 7:00 that night! Well, we got four offers all at or above the asking price! I scrutinized the offers and noticed that all had co-signers. I finally selected the highest bidder, but only if they would add an additional qualifed co-signer. They complied and I sold it for 10% ABOVE asking. $110,000! I was asking only $99,000. I know NOTHING about sales, or real estate, My agent was in the zillion dollar club and knew nothing about people, but he had to drive fancy car. I still had to pay the sucker his 6%. The most honest agent was the Spanish speaker. He promised nothing. The house was a small tract house with a swamp cooler and I did all the usual staging, painting, color coat, polish, wax landscaping and flowers .
Last night I decided to see how this house was doing. I used Zillow to learn that it has a Zillow value of over $550,000. That is insane!! CRAZY for a 55 year old tract house. Zillow had nice closeup areal photos. What a surprise. What happened to code enforcement? The garage door was boarded ,stuccoed and an additonal structure connected to it was about another 400 sq feet. Windows were cut in two of the garage walls, The back yard was now paved with concrete and almost every available inch was covered with a make shift addition. Fence to fwence...a dangerous fire hazard and against the building codes. What are these people thinking? I noticed that thay also paved over most of the front yard so they had a place to park numerous cars. The place looked like a baghdad disaster. The roof was the same (I had it re-roofed) but it is ready to be reshingled. How can anyone buy such a house? and a bigger question is why? Our household income is about $150,000/year, and we own all cars, have no plastic, and no debt and we couldn't afford this old house. In our area of central CA, which is also in an overheated market, you can buy a almost new CUSTOM 2,000 sq ft single story ranch 3 bed 3 bath house with central heat and air on a .3 acre lot in an exclusive area for LESS than this price. Why are people in LA paying these outrageous prices? I just returned from a trip to Florida, Mississippi, Louisiana,Texas, New Mexico , Arizona and Nevada. Even in this insane market you can do better than this. They have a NEW housing development in Scaramento that stopped building. Last month they sold a 5 bed 3 bath for $230,000 which was a REO which was originally $650,000 last year. Get ready Los Angelenos , you are in for a BIG bad roller coaster ride. In October many of you with ARMS, will get a surprise when you see just how much a few percentage points of interest accumulates. My only recommendation, from what I have seen so far, is that if you can't afford your mortgage now, sell and get out fast! very fast. Price your house as THE LOWEST comp by maybe ten thousand or so to encourage someone to buy today! Get your bags packed because it will sell quickly even now. The sales killer is the resistance of homeowners to realize how the market has changed. If you want a low priced house move to Bakersfield or Riverside in California, or move to Florida. They are almost giving away new houses there now. In some counties they have over 25,000 houses for sale with another 20,000 NEW houses to be added to the market as they are completed. Good luck. I am glad that I moved when I did.

[john]

I left Los Angeles (Arleta) in 1985 before I sold my house in a bad sellers market. My new job was waiting I had to go. My LA realtor didn't have a clue how to market. When I dropped in on an open house he set up for my benefit, I noticed something as people walked through. I asked him who would most likely buy my house and why. He acted surprised and mumbled realtor blabber about staging and chip and dip and basically a dumb look. He said its priced to sell - but no offers. I asked him if I could try to sell it today. He said okay. During the day, several realtors who looked like they were in a Sopranos episode were offering about 20-30% below my asking, and their clients weren't even qualified enough to buy a bicycle. I asked my agent to babysit for a few hours while I did my work. I went to a print shop and printed fliers in Spanish. I bought some brightly colored green red yellow balloons and I picked up a few jumbo packs of tortillas a quart of salsa. I went to a record store and asked for an appropriate selection of a Mexican party record of folks songs. I got back and home and started to work. I asked my agent if he knew an agent who spoke Spanish. He replied and I said if you want to sell this house today, get him here NOW. He complied and the agent showed up just in time for me to crank up the sounds. My house had an intercom in each room - which really worked. I piped the music throughout and asked the agent if he liked the music, He smiled. I told him if he could sell the house above asking I had a $100 dollar bill for him. We waited, I had put the flyers on the windshields of all the cars in the local parking lots. Party - open house--in Spanish. The bait was set and we waited. Within an hour we had over a dozen prospects. The agents ran out of business cards. Well, instead of all the snake in the grass low ball offers we were getting real offers above my asking. I noticed that some of the women would drive back and forth, and would comne back in to tell me. This is my house! I told them we had several offers on the table and I would consider them at 7:00 that night! Well, we got four offers all at or above the asking price! I scrutinized the offers and noticed that all had co-signers. I finally selected the highest bidder, but only if they would add an additional qualifed co-signer. They complied and I sold it for 10% ABOVE asking. $110,000! I was asking only $99,000. I know NOTHING about sales, or real estate, My agent was in the zillion dollar club and knew nothing about people, but he had to drive fancy car. I still had to pay the sucker his 6%. The most honest agent was the Spanish speaker. He promised nothing. The house was a small tract house with a swamp cooler and I did all the usual staging, painting, color coat, polish, wax landscaping and flowers .
Last night I decided to see how this house was doing. I used Zillow to learn that it has a Zillow value of over $550,000. That is insane!! CRAZY for a 55 year old tract house. Zillow had nice closeup areal photos. What a surprise. What happened to code enforcement? The garage door was boarded ,stuccoed and an additonal structure connected to it was about another 400 sq feet. Windows were cut in two of the garage walls, The back yard was now paved with concrete and almost every available inch was covered with a make shift addition. Fence to fwence...a dangerous fire hazard and against the building codes. What are these people thinking? I noticed that thay also paved over most of the front yard so they had a place to park numerous cars. The place looked like a baghdad disaster. The roof was the same (I had it re-roofed) but it is ready to be reshingled. How can anyone buy such a house? and a bigger question is why? Our household income is about $150,000/year, and we own all cars, have no plastic, and no debt and we couldn't afford this old house. In our area of central CA, which is also in an overheated market, you can buy a almost new CUSTOM 2,000 sq ft single story ranch 3 bed 3 bath house with central heat and air on a .3 acre lot in an exclusive area for LESS than this price. Why are people in LA paying these outrageous prices? I just returned from a trip to Florida, Mississippi, Louisiana,Texas, New Mexico , Arizona and Nevada. Even in this insane market you can do better than this. They have a NEW housing development in Scaramento that stopped building. Last month they sold a 5 bed 3 bath for $230,000 which was a REO which was originally $650,000 last year. Get ready Los Angelenos , you are in for a BIG bad roller coaster ride. In October many of you with ARMS, will get a surprise when you see just how much a few percentage points of interest accumulates. My only recommendation, from what I have seen so far, is that if you can't afford your mortgage now, sell and get out fast! very fast. Price your house as THE LOWEST comp by maybe ten thousand or so to encourage someone to buy today! Get your bags packed because it will sell quickly even now. The sales killer is the resistance of homeowners to realize how the market has changed. If you want a low priced house move to Bakersfield or Riverside in California, or move to Florida. They are almost giving away new houses there now. In some counties they have over 25,000 houses for sale with another 20,000 NEW houses to be added to the market as they are completed. Good luck. I am glad that I moved when I did.

[Pat]

Long Beach - depends on where. Naples and the beach areas are not and were never lower priced. Other areas, yes.

[rusty]

i think long beach is safe if you buy over $600,000. try to stay south of 3d street near the water because low-priced blocks are the riskiest.

[Inland Empire]

For Beacher - I grew up in Long Beach, You would have to look at what neighborhood you are in to determine the housing market. Long Beach has many, many types of neighborhoods from the good to the bad and much in between.

[Eurotrash]

Mr. Income Stream-

True, many of the loans have been sold off to Wall Street, but big lenders still hold a large portfolio of loans. Also, I was including Investment Banks when I wrote "banks", but the point is the same: the holders of the bad loans have not yet chosen to lower the prices of their foreclosed homes, as they don't want to contribute to an overall fall in prices which would force them to lower their Mark to Markets.

As for my "precious Westside": I absolutely believe that Westside prices will fall, just much later than the outlying areas, due in part to the higher general incomes of buyers here. That said, even on the Westside, the people who bought in 2005-06 will be hurting pretty soon.

Beacher-

Apologies, should have been more clear. I would not include Long Beach in the outlying areas of LA. I was referring to areas like Riverside and Palmdale. In general I think the areas closest to the Coast will be the last prices to fall.

[sheila]

sorry, but i gotta call "chicken little" here. it seems like all these articles choose the most sensational statistic for their headlines. there are a thousand variations available, and there's always one that can "shock." if it's year over year percentages of notices of default, if it's X fund-rating or Y lender profits, if it's month over month price drop, etc. that is the headline, from which there is a tremendous ripple effect. i had to laugh when i saw the horrendous nearly thousand-percent statistic for San Bernardino County, so i decided to look. 137 houses. now if "137 houses in the nations largest county went into foreclosure" had been the headline, how many people would have freaked out?

this, like so many other real estate matters, is a misleading load of BS, designed to manipulate the market. this whole "balloon" and "crash" and "foreclosure" and "tightening" and on and on could have been avoided if people would just use plain old common sense, but the lenders, realtors, flippers, investors and yes, reporters all have had a vested interest in market manipulation and the accompanying totally-preventable drama. oh, and grotesquely disproportionate profits, all well in pocket before the inevitable crash. see 1998-2000 tech company/investor idiocy for reference.

this is just soooo much like the current politicos, war profiteers, "journalists," etc. a bunch of mercenary liars manipulating situations to their own personal benefit. who pays? normal, hard-working, lower-and-middle-class taxpayers/homebuyers who just want to live their lives. this decade (please, god, let it end this decade) will go down in history as the biggest lie, from start to finish, in the history of this occasionally great nation. disgusting.

[www.BetterVillage.com, XYZ, PDq.]

It's a big con, Sheila. Good conmen and women know how to do it time and time again, and the best ones know how to get us to thank them for doing it to us. And when they see we've figured it out, they either tell us we're seeing dancing fairies or that they really don't know what we're talking about.

I was standing in line at an airport years ago, and an older gentleman was standing right behind me. I got squeezed a little by the guy in front of me, and while I was dealing with that one's apology, I felt a little pressure in my front pocket where I kept my wallet. Instinctively I reached down to check the pocket, and what did I find? The hand of the nice older fellow behind me. He didn't blink an eye... he said in a very soft voice: "oh, I'm sorry.". and continued to stand behind me as if nothing had happened.

The pickpockets of the financial world sometimes get slapped on the wrist, sometimes a little jail time, sometimes a little 'tax" in the form of penalties...
But each time they do, they learn... they get a little slicker, a little more "down-home" a little more "charitable" and a little more credible. A "win-win" for them, but not for us, they think. They don't seem to realize that "they" *are* "us." Robber Barons... new Gilded Age... somehow I don't think this will be the last time.

[Cal]

"so i decided to look. 137 houses. now if "137 houses in the nations largest county went into foreclosure" had been the headline, how many people would have freaked out?"

It would help if you looked at the current quarter talked about which was 1,489 houses went into foreclosure. In that same period of time 6459 houses sold on the open market. So of all homes sold in San Berdu the last quarter 18.7% were foreclosures.

I should hook sheila up with BV, for some reason I think they would hit it off quite well.

[Cal]

You simply cant make this stuff up.

[www.BetterVillage.com, XYZ, PDq.]

Um, cal, I think you missed sheila's point with all yer fancy figurin'.

Go to your room and eat that popcorn you love to eat while the economy melts down.

Now, if we want a really big number.. how bout... 10,200% increase in foreclosures in Yolo since last year. Yup... it's right in there, but nobody would use that number, because it would seem like they're tryin' to fool us.

Cal actually agrees with everything I say, he just can't admit it because his job is to make it *seem* like he's on the attack.

So why are they using the big numbers and headlines? To spread fear... why? To make money. Who? We'll find out soon enough who is making money from the "bubble popping"

[sheila]

sorry about the quick reference, but my comment stands. if they just put the number, and put it in context, it would be a snore at 137 or 1489, especially since the "boom" hit the SB market about a year later than LA, and it was largely based on new construction, not flipping existing homes, so there were just not all that many houses being sold pre 2005 which would have been subject to foreclosure in 2006.

and i love your perfect example of a totally disingenuous comparison of "houses sold" with "houses gone into foreclosure" (none of which were sold). why not compare number of houses burned down? more apt, considering it's at least a stat of homes lost to their owners. or how about comparing the number of houses in CA (over 8.4 million) compared to the number recently gone into foreclosure (17,408), for a headline-grabbing 0.2%!

you are correct. BV usually makes more sense than you. hey, i should hook you up with dick cheney. somehow i think you two would get along.

[www.BetterVillage.com, XYZ, PDq.]

Sheila! I think you just gave me credibility! I knew we had some big brains that actually gave a peep out there...

cal's ok.. just still a little dazzled by the numbers... we can set him/her up with a cult deprogammer too :)

[Cal]

Sheila,

Foreclosures as a percentage of houses sold (foreclosures are sold, it is called a Trustee Sale) is a widely looked at number that tells you (generally) if foreclosures are bad enough to affect prices. The actual number of homes sold as a arms length transaction was 4,970 during that quarter. Sorry to have thrown business metrics at you.

The context is there in the press release, worst NOD since 1996, worst Recorded Trustee Deeds in California since DQ has been recording the numbers, what more do you want?

I'm no Chuck Woolery, but you and BV really need to make a Love Connection, I can sense the chemistry.

[LA Expat In Arkansas]

BV: You're right - somebody is making money from the Bubble - any idea who? RE agents? Lenders? Insurance Companies ( they profit from every tragedy)? Who am I missing?

Sheila: San Bernardino County is the largest GEOGRAPHICALLY - not population-wise. I believe that skews you premise somewhat.

C'mon down to Arkansas all you equity-rich refugees. Look wat $429k will buy you www.sharpmls.com/110899

[www.BetterVillage.com, XYZ, PDq.]

Expat: Let's all go out for a Ben and Jerry's in Little Rock.. you me, sheila, cal and figure this thing out. At least that might get cal away from his popcorn.

"Somebody is making money from the bubble"

I'm looking at the people that are going to be making da big bucks from all this.. not the individual agents or companies.. but the people who knew how to prey on all the fear and greed in a more macro way. Insurance companies... now... I think you really got something there. On the upswing it was the greed feeding the fire with cheap credit and "insulated" risk. On the downswing, there's a host of big profiteers, but as fear spreads... the insurance industry makes biiiiig bank. Oh those quiet, humble tycoons of the insurance business.

So.. if we're into dancing fairies, or conspiracy theories (conspiracies do exist... according to the law... witness the RICO laws)... we need to look at who is profiting from both the upswing *and* the downswing. Who has interests in *both* finance *and* insurance, for example. Could be that there is no single entity or "wizard" behind the whole mess, but my inclination is to think that if you follow the money... the ultimate big money will show you who the brains and muscle behind this operation are. Angry software giants? Avuncular "value based" investors?

If we look at the forbes list of the wealthiest "certified" individuals... we see it's a pandemic... Bill Gates - tech, Warren Buffett - "value", Carlos Slim - telecom (not afraid of getting his hands dirty) Ingvar Kamprad - shlocky furniture, Lakshmi Mittal - steel. Sheldon Adelson - whoohoo... gambling. The list goes on. And it could very well be that these are not the wealthiest people on earth.. only the ones that don't mind us knowing that they're wealthy. We've got our Trumps with $100M homes, but we've also got others with $100M homes that no one has ever heard of. Maybe we need to worry about what the quiet ones are up to as well?

[sheila]

ok, cal, i hear what you are saying, but as long as we are (both, eventually) being all "accurate" (yes, technically foreclosures are "sold" but it was my understanding that lenders/underwriters kept most of them, with the "sale" being a legal fiction), then let's be all "accurate" about my complaint. which was about sensationalizing the headlines, which is a way of misleading people. which, if you look up a few inches, appears to have happened right here on our beloved blog. PV certainly didn't choose your ratio for the headlines, did he? he didn't choose my 0.2% figure, not even the 127% figure. he chose the big, scary, sensational 799% figure.

no, i don't suspect friendly blogger peter viles to be part of a grand conspiracy, but it does seem likely that a chicken little scenario is afoot, which has a self-fulfilling prophecy aspect to it, regardless of intentions. telling people that for every 5 houses sold last quarter in SB, one went into foreclosure, which is historically VERY high, is the story here (in our limited example), and it uses numbers like "one" and "five," not 799. scary enough, but not "aliens invade earth" scary.

and so, back to my original point, even though i concede that you can toss numbers out till you make everyone cross-eyed, you still seem to miss the human angle... and that is, there are 7 ways to tell every story. how a story's being told often tells you more than what is actually being told...

good night!

[Inland Empire]

Yes someone is making money or will from this situation. I suspect the investors outside the US will be buying up alot of these repo houses at great prices in the near future. They will hang onto them and turn the again in the future. If you doubt this, research the history of such places as Beverly Hills, West Covina and Garden Grove to see how others like California land.
As for the Inland Empire, you have tons of tract houses in Perris that started life with bad loans. You have cities where people have limited opportunities for income (Needles, Barstow, 29 Palms and others). If we were able to break down the rates of foreclosures by neighborhoods for comparisons, I think the levels might have a different story to tell.