This is the only way we can clear this market of the excess inventory and start to recover. Granted, it is only a month’s worth of data but it is a large swing and that does mean we need to watch January close to see if it continues. The immediate benefactors will be Home Depot (HD) and Lowe’s (LOW)as distressed sales will come with an increased need for fixtures/paint etc. Looking down the road more builders and developers will see positive momentum begin to build.
We have been in denial for far too long that we could modify loans or save millions of foreclosures. The abject failure of these programs (measured by the rate of re-default) is proof enough of the simple fact we can’t. The overwhelming majority are due to people without as job or those who took out a loan they have no hope of paying for. Neither of these scenario lend themselves to a “fix”. Yes, we can find folks who are getting stiffed by the courts/banks etc. However, as usual these people are made the face of the issue by the media while the reality is they are a small, very small portion of it.
The sooner we can come to reality, take the medicine and clear this excess inventory, the faster the housing market can recover. Maybe this reports is we are finally making some progress there…
We are getting bullish on housing as we feel it may be bottoming. More reports like this would back that thesis.
HousingPulse Distressed Property Index Surged in December
While First-Time Homebuyers Rushed to Close TransactionsWASHINGTON, D.C. (January 24) – Sales of distressed properties surged in December as many banks resumed foreclosures following stoppages in late fall. At the same time, first-time homebuyer activity remained strong as purchasers rushed to close transactions before interest rates rise further. These are two of the major findings of the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey.
One of the biggest developments in December was a sharp jump in the HousingPulse Distressed Property Index or DPI, a key indicator of the health of the housing market. Last month’s DPI was 47.2% and reflected the share of total home sale transactions that involved distressed properties. December’s level was up from 44.5% in November and nearly matched the 47.5% peak in the index reached in September, right before the so-called “robo-signing” controversy forced major servicers to temporarily halt foreclosures.
Distressed property sales were not distributed evenly around the country. In California, a state hit hard by the foreclosure crisis, an enormous 66% of all transactions tracked in December involved distressed properties. The combined area of Arizona and Nevada similarly suffered, with 62% of transactions being distressed. However, in the oil-producing states of Texas, Oklahoma, and Louisiana, only 29% of transactions were distressed.
Distressed property sales were not distributed evenly around the country. In California, a state hit hard by the foreclosure crisis, an incredible 66% of all transactions tracked in December involved distressed properties. The combined area of Arizona and Nevada similarly suffered, with 62% of transactions being distressed. However, in the oil-producing states of Texas, Oklahoma, and Louisiana, only 29% of transactions were distressed.
Separately, sales to first-time homebuyers continued at the high level of 37.7% of all transactions tracked in December, a strong increase from the 34.4% percent level found in the months of September and October. Fears of rising interest rates prompted first-time homebuyers to get off the fence and buy before another burst of interest rate-increases. At the same time, investors reduced their activity amid fears of falling house prices
“The combination of increased property supply and growing homebuyer demand caused a blow-out month for home sales,” commented Thomas Popik, research director for Campbell Surveys. “We knew this was coming because average transactions for our survey respondents rose from 2.9 in November to 3.4 in December.”
December existing home sales, released by the National Association of Realtors several days after the Campbell Survey results, showed a strong increase that exceeded nearly all macroeconomist predictions. The normal seasonal pattern is for existing home sales to be nearly flat between the months of November and December. However, in 2010 existing home sales rose 13.8% between November and December, while falling 2.2% over the same two months back n 2009.
Campbell Surveys predicts the surge in home buying may not last. “January and February are typically the slowest months of the year for home buying,” explained Popik. “And we’ll still have a backlog of foreclosed homes coming on the market during the winter, so prices may come under pressure, too.”
The Campbell/Inside Mortgage Finance HousingPulse Tracking Survey involves more than 3,000 real estate agents nationwide each month and provides up-to-date intelligence on home sales and mortgage usage patterns.
For more information on the survey, contact John Campbell at Campbell Surveys at (202) 363-2069 or john@campbellsurveys.com.