Wednesday, February 15, 2012

Lawler: Short Sales increased significantly in Q4

by Bill McBride on 2/15/2012 03:43:00 PM

Hope Now released its December report which estimates delinquencies, foreclosure starts, completed foreclosure sales, loan modifications, and other loan “workout” plans for the US first-lien residential mortgage market. According to the report, Hope Now estimates that completed foreclosure sales totaled 842,777 last year, down about 21.2% from 2010. While Hope Now does not explicitly release estimates for short sales/DILs, it does release estimates for (1) “other workout plans,” which is the sum of repayment plans initiated, “other” (non-mod) retention plans completed, and “liquidation plans” – which are short sales and DILs; and (2) separate estimates for repayment plans and other retention plans. One can thus “solve” for Hope Now’s estimates for short sales/DILs.

Using my proprietary “subtraction” software, I was able to derive Hope Now’s estimates for short sales/DILs in 2011 – 397,280, up over 12% from 2010. HN’s short sales/DILs estimate hit an all-time monthly high of 40,533 in December, and last quarter’s estimate of 110,123 was the highest quarter on record. Other industry data suggest that DILs in both years were “diddly,” so bottom line short sales appear to have increased significantly last quarter.

Of last year’s estimated 842,777 completed foreclosure sales, 628,014 were owner-occupied properties, down about 20% from 2010, and 208,933 were non-owner-occupied properties, down about 26.4% from 2010. HN’s data do not allow one to break out short sales/DILs by occupancy.

Hope Now industry-wide estimates are based on activity of its members. Hope Now’s “derived” estimates of short sales/DILs are not available prior to 2010. Based on other industry data, however, I have my own estimates for 2008 and 2009, so here are some estimates of completed foreclosure sales and short sales/DILs for 2008, 2009, 2010, and 2011.

Completed Foreclosure Sales and Short Sales (estimates, thousands)
Completed Foreclosure Sales5149149491,070843
Short Sales/DILsN.A.103274354397

CR Note: I added 2007 foreclosure numbers. It appears short sales were running at a rate of just under 500 thousand per year at the end of 2011. The shift from foreclosures to short sales is continuing (although short sale shenanigans are still rampant). Jim the Realtor noted the shift to short sales today while discussing an REO:
"This might be - this is, there is no question about it - the last REO listing I'll ever have in Carmel Valley. They have turned off the spigot. Foreclosures are going the way of the dodo bird. It is going to be short sales from now on."
Carmel Valley is a fairly high end area of San Diego, and the lenders might be targeting higher end areas for short sales - but Jim's comments highlight the trend toward short sales.