Update: About those foreclosure figures...

Clearly, a number of you disagreed with the way we reported today's batch of foreclosure numbers from RealtyTrac. To refresh, we led with the fact that California foreclosure filings were flat from June to July, and not with the fact that they are running 289% ahead of year-ago levels.

To which commenter Tim K. observed, "Talk about spinning the stats. It's the *rate*, not the direction.

I'm heading towards this brick wall at 60 mph. But hey, in the last 5 seconds my speed is STILL 60 mph! Whew, I thought for a minute I was accelerating! All is well! :)

A fair point, well made.

By way of explanation: We are pessimistic about this trend; we expect the number to rise month-to-month as more of the toxic loans made in 2005 and 2006 hit that magic 25th month and reset to higher rates. So we felt it newsworthy that the spike -- which we may be wrong about -- has not yet begun.  Here are the numbers from RealyTrac of foreclosure filings by month:

Month       California filings    LA filings
July 06     10,025                   2,079
Aug 06      12,486                  2,106
Sep 06      14,806                   3,675
Oct 06      16,098                  2,557
Nov 06      19,248                  4,493
Dec 06      12,623                  3,281
Jan 07      25,961                   5,032
Feb 07      23,200                   3,958
Mar 07      31,434                   5,155
Apr 07       30,505                   5,690
May 07      39,659                   9,329
June 07     38,801                   9.035
July 07       39,013                   9,407

Comments? Thoughts? Insights? Email story tips to lalandblog@yahoo.com.

Comments

[Cal]

Here is a bit more context:

http://img444.imageshack.us/img444/1146/foreclosuresds4.jpg

The sum of NOD+NTS+REO graphed monthly since Realtytrac has publised a report (for California only).

IMHO, the drop around Jan '07 to Mar '07 was more related to the massive number of buybacks of loans and implosions of lenders going on (so the loans servicing rights got moved around, probably delaying any foreclosure process). I think we will see another big jump soon with the money having dried up in the last 3 weeks. If not August '07 numbers then certainly September '07.

[Martin]

Why do so many on this blog have an inability to put a human face on the entire real estate market mess.

The escalating number of foreclosures means that many more individuals and families will loose their home. I'd stake big bucks on the likely fact that the majority of these people are hardworking individuals who got caught up in real estate boom mentality and industrious (sic: greasy) lenders. Now they are being punished for wanting to live in their own home. And all I read here is "who cares about them ... no bail out ... no help ... let them fall."

As a responsible landlord, I would never lease an apartment to an applicant that cannot really afford the rent. I'm helping them while also protecting myself.

The banks -- with their huge sales forces vying for a piece of the subprime loan business -- are the culprits here. It doesn't take an economist to figure that out. Complain about them. Regulate them. Even force them to re-evaluate interest rates on some of the loans (which would be better than seeing the banks not knowing what to do with the sudden rash of homes they suddenly own).

I, for one, believe there are rational programs that could be created to save those who have enough financial backbone to be saved. Letting them fall only means real estate market problems will affect every other financial market and, possibly, our jobs.

[Jeff]

Off topic but relevant to the Countrywide situation:
Countrywide Seeks Cash.
http://thegreatloanblog.blogspot.com/

[longdriver]

The drop might be due to the way they were counting the filings. I seem to remember the way they used to report resulted in some addresses being counted multiple times. I think they started reporting by address and not transactions recently. Anyone else remember this or have I had a few to many this evening....

[Cal]

longdriver,

The change you are talking about happened in July, they only started reporting unique addresses for their quarterly report. But this report is in still the same format as each of their previous months.

[brettdl]

Martin, I agree with you in only one way: homebuyers tricked by shady salesmen. However, my neighborhood wasn't filled with suckers. It was filled with people who fell for the oldest greed ploy in the book: they were told buy now, pay later.

The sad fact is that our culture encourages immediate self-gratification. As such, people who could not afford homes bought them. Or refinanced to take money out for boats and cars. Or bought a much bigger house than they could afford.

I do think its a travesy to lose your home. But bailing these people out means punshing those who live within their means. And as someone who has been working in the trenches all my life that makes my blood boil.

And if you think I'm harsh on the homeowners, you should see what my opinion is of the financial community that created this whole mess. They were even greedier, then turned to the government for help as soon as their lifestyles were in danger.

It's just a shame that the homeowners will bear a larger percentage of suffering than shady lenders and security anlaysts.

[bittterLArenter]

Martin:

boo hoo hoo for the hardworking individuals that got caught up in the "real estate boom mentality". Cry me a river for these greedy fools. It was the LENDER that tricked them into taking out a mortgage they couldn't afford! How could they be expected to read a loan document on the biggest purchase of their life?!? Or ask questions?!? or get someone qualified to understand it to look at it *for* them?!? They *deserve* 20% YOY appreciatiion because they work hard, unlike us dirty renters that are such leeches by living within our means.

None of them are going to want to be bailed out since they were literally banking on the appreciation to begin with(everybody was a flipper if they intended to refi within a few years, whether they admit it or not).

No deserving family should live in an apartment! Home 'ownership' is their right! Give them and other speculators every bailout we can think of, since all homedebtors are entitled to gains.

Tools.

[MichaelT]

There is no doubt that this is a huge mess, destined to cause much suffering. But, IMHO, market forces have to be allowed to play out, or the whole system is corrupt. People who buy a home as an "investment", hoping for massive appreciation are no different than people investing in stocks (or porkbellies), they are taking a risk. If you don't want to gamble, don't put your money on the table. I'm not for throwing people out on the streets, but alot of these people knew what they were doing and were blinded by the thought of instant riches.

[Tim K.]

Martin - let me put a human face on this tragedy for you:

I have many friends and coworkers who are hard-working, intelligent, and make close to $100K a year, and they have had to put their life plans on hold because they can't afford to upgrade to a larger place. They do not believe in going into debt and having someone else pay the bill when they overextend themselves. They are frustrated that they are getting outbid by people who are essentially betting that they can get rich by gambling on a house, the very house these people only want to live in.

These are the real victims in this housing bubble. The foreclosures and evictions will be well deserved. The news we are hearing is GOOD NEWS. It means the return of sanity to a market. It means housing will once again be affordable commodities.

In the mean time, these folks are moving out of state to pursue their dreams elsewhere. Maybe in 30 years Los Angeles will regain its allure as a place where young people can go to school and stick around in the area to build their careers and make a difference. For now though, this place will simply be the place you relocate to once you've hit the super-rich jackpot and want to be seen with others who are also super-rich. I, for one, do not wish to be part of the King and Peasants economy this place is becoming, as I am now merely a peasant. I would prefer to be on a more equal footing with my neighbors.

[investorguy]

Now Martin, don't go injecting logic and compassion into this ;-)

[Martin]

Actually, to everyone who commented on my "where is the compassion" entry, you all represent a certain logic that I do understand and appreciate.

Bitter LA Tenant, you write: "No deserving family should live in an apartment! Home 'ownership' is their right!"

I do wish to respond to this comment:

Homeownership is not a right. It is a goal. Once that goal is reached, the hard work really begins because one now has even higher overhead. Every homeowner bets that, over time, it will be easier to keep that home or "move up" to a better home. Again, not because it's a right; but because it's a goal.

I think almost all of us will agree that certain lending practices and aggressive sales teams are the main culprits in this mess. I still can't believe lenders were STUPID AND GREEDY enough to create loan programs destined to fail. One hundred to 110 percent loans are just idiotic. I knew the loans existed, but -- until this mess -- I did not realize 80% loans to home values represented only a small part of the market.

Let's have some concern for the people whose lives are turned upside down when their star crossed dream of home ownership collapses. I believe some federal and/or state program needs to be established to evaluate, on a case by case basis, each foreclosure risk. Owner occupied homes of people who do have viable financial backbones, but got caught up in escaling interest fees and penalities, should be bailed out ONLY IF they can keep up re-assessed payments during a set period of time.

I do believe the market does need some price correction and most of us will feel the long arms of a recession (in one way or another) until this entire financial crisis bottoms out. Maybe it's necessary. My point to this remark is, thanks to reading news reports and blog entries here, my views about this current real estate market cycle have changed somewhat. I've come a long way because I respected others' views here during the past few months.

However, to those who are sitting on the sidelines clapping their hands gleefully because some poor sucker is about to be forced out of his/her home, I can only say that there is something deeply distressing in our world today. Maybe you should rethink who to blame and who to feel sorry for. That would be a start.

Everyone is not a mean 'ole flipper trying to make a lot of bucks (and why is that a crime in a capitalist democracy?!). Maybe -- just maybe -- some people need a second chance to regroup. The burden of responsibility likes on government and banks to determine who they are.

[problemWithcaring]

"I have many friends and coworkers who are hard-working, intelligent, and make close to $100K a year, and they have had to put their life plans on hold because they can't afford to upgrade to a larger place...These are the real victims in this housing bubble."

GAWD - I HATE the LA attitude sometimes.

The pendulum has swung. So now it’s not the working poor that is "entitled" to homeownership, but instead its the upper middle class DINK's?

[Joe]

Martin,

I feel no sympathy for that person you label a "poor sucker about to be forced out of his/her home". Why? They shouldn't have committed to something they couldn't afford in the first place. They should have read the terms before signing. If a person doesn't understand how their mortgage works, then that is their own fault. Additionally, many of these people knew what they were committing to and are not the poor suckers you describe. Instead, they were greedy and expected unrealistic rates of appreciation. It's like saying you'd bail someone out who bets his life savings at the roulette table and loses.

So I don't blame the brokers and lenders, it is ultimately the individuals who signed their names to the documents. And what difference does it make if these people are forced out of their homes? They couldn't afford the home in the first place, and they will just be going back to renting or owning something smaller (like what they should have been doing if they lived within their means).

[Martin]

I understand your position, Joe. Some people had stars in their eyes and definitely did not plan well. There is much to said for those who practice prudence before they buy their first home. But maybe -- just maybe -- some folks in the initial phases of the foreclosure process can be helped by (1) working harder to save their homes, (2) working with their banks to pay off their past due balances, and (3) taking advantage of some sort of government-backed program that allows them to stay afloat as long as they follow the "catch-up rules. That's not giving away money. That's giving them a chance to get their acts together in the very reality that you refer to.

My whole point about compassion is solely to say that there is something very wrong among those who can't wait for this sort of homeowner's collapse so that they can profit from their misfortune. Yes, that's one way to gain wealth in real estate. But it's a lousy way.

This should interest everyone. I just received a faxed flier from this company that regularly promotes to me (while leaving out their name). Here's the basic copy:

CUT YOUR HOUSE PAYMENT IN HALF! .... 107% PURCHASE ... PREVIOUS BANKRUPTCY OK! ... PAY ONLY $3,750 A MONTH ON A $1.5 MILLION LOAN ... HURRY! ... TAKE EQUITY OUT OF YOUR HOUSE WHILE YOU STILL CAN!

This was sent an hour ago! Does anyone want the company's phone number? :-)

Something tells me this problem is still in the gestation period. What to do ... what to do?

[jeremy R]

Why should I feel sorry for homeowners?

I have credit card companies pushing credit on me all the time. Just because they are begging me to use it doesnt mean I will sign the dotted line.

If they had their way, I would have 50k in available credit all maxed out.

Homeownership provides a great reward but it also requires a lot of responsiblity. To put a human face on this problem is to say let the homeowners get all the reward while we subsidize their responsibility. How does that make sense?

[jeremy r]

"There is no doubt that this is a huge mess, destined to cause much suffering. But, IMHO, market forces have to be allowed to play out, or the whole system is corrupt. "

I agree. We are in a bubble wether we like it or not. When bubbles burst, people get hurt. There is nothing any of us can do about it. We have two choices. Let this bubble deflate and die hard and fast, or mess with the bubble and exacerbate the situation long term.

Some people will get hurt now, but that is what has to happen for fewer people to get hurt later. It is what it is.

[Jeremy R]

"My whole point about compassion is solely to say that there is something very wrong among those who can't wait for this sort of homeowner's collapse so that they can profit from their misfortune. "

I cant speak for everyone, but I feel that most people arent happy that others are suffering. There is a bubble and it must deflate. In order for it to deflate, people will have to lose their homes. It is a painful process, but it is what it is. When people see foreclosures they the fact that the market is beginning its long and painful march to recovery. We have less sympathy for many who will be burned in this siutaion because they are highschool educated adults and they knew there were risks. I dont care what lenders said, these adults knew there were risks.

[investorguy]

And Joe, some people COULD afford their homes when they got loans. They took the lower priced loans to be able to do other things, like pay for college or start businesses. Then something happened and their incomes were cut -- a layoff, a bad sales year, medical bills, whatever. Not everyone was greedy and overreaching.

Get back to us when something happens to you to change your situation and you're suddenly in trouble. See if your views on compassion change.

[Martin]

High school graduates? I'd be curious to know what the median education level is of those who are in or on their way to foreclosure. I'm sure a smattering of them have their doctorate or graduate degrees. It's all academic. Some people took a shot at real estate profits and the security blanket against inflation that true homeownership is all about. They lost.

Most of your position is quite clear, Jeremy. You make sense. I also realize you understand my whole point about compassion.

If the majority of apartment dwellers say "let the chips fall where they may," at least -- if only for a moment -- a handful of them weighed another point of view. Again, I believe if there is a small market segment that is financially viable and can be saved from the stimga and distress of losing their homes. If they pull out of their crisis because they were helped, terrific. That's not delaying a market correction that is clearly underway. That's just helping those who need a little help to help themselves.

[Martin]

Right on, Investor Guy! So many here seem to think people have financial stress because they didn't plan well or were greedy. They seem to thinkall of the people in foreclosure are the ones who hyped up the market through their own folly and now they deserve to go bust!

To the ones who believe this: I wouldn't wish this fate on you. Ever! I just hope you realize these individuals did not create the boom. Perhaps they "reacted" because of it. An assembly line of easy money and easy credit for a few years created the real result we have today. And, again, I didn't even know this was occurring until I began focussing on media reports and this blog about a half year ago.

Stuff happens. If a person falls down, it's just not reasonable to be happy about it, thinking it will somehow benefit you. That's the point.