This Reuters headline caught my eye tonight. According to the article Bernanke said "A widespread decline in home prices is a relatively novel phenomenon, and lenders and loan servicers will have to develop new and flexible strategies to deal with this issue." Novel unless of course you were alive for any of the previous declines, like say 15 years ago in the early 90's.
According to the news last week you would have thought the crisis had been averted, there is no current or pending recession, and unemployment is dropping. Yet in his prepared remarks Bernanke says (emphasis added) "High rates of delinquency and foreclosure can have substantial spillover effects on the housing market, the financial markets, and the broader economy." Can have? Does he not get that we have been in record foreclosure territory for nearly a year - far exceeding all past experiences - and that based on current foreclosure data it is getting worse not better?
Readers of our CA Foreclosure Report have been well aware during that time, and our April CA Foreclosure Report, to be released next week, will once again show lenders taking back a record number of properties. At what point does this stop just being an academic possibility?
It has been very heartening to hear reports of strong sales activity again from local Realtors as affordability has begun to return to certain areas of CA. But the foreclosure crisis is far from over, and as the Fed apparently is just now realizing, it can have impacts far beyond housing. For those of you investing right now, be careful to keep an eye on cap rates and know that we may still have some interesting times ahead.
Sean
Comments:
Bernanke's full speech is now available.
Michael "Mish" Shedlock's Global Economic Analysis Blog also has more on Bernanke's speach.
http://www.pasadenastarnews.com/ci_9247386
According to the Pasadena Star News Realtytrac claims 64k foreclosure filings for California in April versus 96k filings by foreclosure radar. Why the huge disparity? Someone forgot to carry the 1 or wrote a bad SQL statement or something.
Anonymous - three things to keep in mind
1) Our sales data is based on daily updates from the auctions themselves, where as RealtyTrac's equivalent "REO" numbers are based on trustee's deeds which are reported weeks after the auction. Last month our sales numbers were 44% lower.
2) While RealtyTrac has yet to post their April report, their March report had gross inaccuracies. Specifically they counted just 9,925 Notices of Trustee Sale for California. A laughable number when you consider there were more than that in just LA, San Bernardino and Riverside counties. We put the statewide total at 27,739. A HUGE difference. And one that is easily verfied in our favor by spending just a few minutes at some of the county recorder websites that offer document counts online.
3) Understand that the only reason I started tracking foreclosures myself was because other sources had such poor quality that I simply couldn't rely on them to run my investing business.
I stand solidly behind our numbers.
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