thehousingbubble@gmail.com
Blog

The Rock Stars Of The Real Estate Recovery And The Emerging Third Wave Of Distress

A report from DS News. “Foreclosure auction inflow data points to a third wave of post-recession distress building in late 2019 and early 2020. A total of 43,232 residential properties nationwide were referred to Auction.com in Q3 2019 for a potential future foreclosure auction, up from the previous quarter and a year ago to the highest level since Q1 2017. The characteristics of the increasing foreclosure auction inflow are distinct enough to label it a third wave of distress emerging in the wake of the Great Recession.”

“The first and largest wave comprised primarily risky loans originated during the 2004-2008 housing boom. The second post-recession wave of distress emerged in 2018 as the result of a series of devastating natural disaster events—primarily hurricane-related—in 2016 and 2017 in Florida and Texas. The emerging third wave of post-recession distress is showing up in parts of Florida and Texas, but it is also showing up in markets far removed from Florida and Texas (see below for some more geographic details). That’s because this wave is less characterized by geographic concentrations of distress and more characterized by concentrations of distress based on loan type and lender type.”

“More to the point, the emerging third wave of distress is primarily driven by a rising undercurrent of defaults among government-insured loans and privately held loans. Two sub-categories within the overall government-insured space stand out: VA-backed loans with a 31% increase and FHA-backed loans serviced by mid-market lenders—many of them so-called nonbank lenders and servicers—with a 17% increase.”

“The Black Knight report shows that the delinquency rate at six months after origination is trending higher for loans originated in 2018 and 2019, with a more extreme upward trend among Ginnie Mae-securitized loans—primarily comprising VA- and FHA-backed loans. The report shows that 3.3% of Ginnie Mae-securitized loans originated over the past 12 months were delinquent at six months, up from 3.1% for loans originated in 2018 to the highest level since 2009.”

“Among all loan originations, the delinquency rate six months after origination was 1% for loans originated in the first quarter of 2019, up from 0.9% for loans originated in 2018 to the highest level since 2010.”

“Among 2,410 counties with foreclosure auction inflow into Auction.com in Q3 2019, 870 counties (36%) posted a year-over-year increase in foreclosure auction inflow, including Maricopa County (Phoenix), Arizona; Miami-Dade County, Florida; Los Angeles County, California; and Bexar County (San Antonio), Texas. Also posting year-over-year increases in foreclosure auction inflow in Q3 were all three counties in the Seattle metro area: King, Pierce, and Snohomish; and three counties in the Denver metro area: Denver, Arapahoe, and Adams.”

“‘Some of the markets with the biggest inflow increases in the third quarter may be surprising given they have been rock stars of the real estate recovery of the last seven years,’ said Jesse Roth, SVP of Strategic Partnerships and Business Development at Auction.com. ‘But those markets may now be victims of their own success, with an unsustainable run-up in home prices pushing the limits of affordability for many homebuyers in recent years. Those financially stretched borrowers now have less equity cushion to protect against foreclosure, particularly if they are in a government-insured loan that came with a low down payment and down payment assistance.'”

“The inflow geographic trends align with recent foreclosure start data released by ATTOM Data Solutions, which shows that U.S. foreclosure starts in the first nine months of 2019 increased in 14 states and 80 of 220 metropolitan statistical areas analyzed (36%). Among larger metro areas, those posting year-over-year increases in the first nine months of the year included Atlanta (up 23%), Orlando (up 24%), Jacksonville (up 7%), San Antonio (up 8%), Seattle (up 7%), and Denver (up 3%).”

“Given no other shocks to the economy or housing market, this emerging wave of distress will likely be the smallest of the three that have materialized in the wake of the Great Recession. However, if dangerous rip currents develop in the housing market (think widespread and sustained home price depreciation) or in the larger economy (think recession), this distressed wave could pack a bigger punch.”

From Market Watch. “Buying a pricey house, but have weak credit? Increasingly, that’s not a deal-breaker. Next year the process of obtaining a new home loan could get easier for borrowers with spotty credit, according to Moody’s Investors Service. The credit-ratings firm sees more lenders willing to finance buyers in the months ahead with less-than-pristine credit by lowering their standards to offset a housing market drained of affordable options.”

“”Reduced home-purchase affordability will continue to drive lenders to loosen credit standards to maintain volumes,’ wrote Moody’s analyst Donald Lee in the credit-ratings firm’s 2020 outlook. ‘With shrinking home affordability, the underwriting quality for non-prime mortgages will weaken as increased lender competition leads to lower standards.'”

“The credit-rating firm does expect growth in mortgage volumes to non-prime borrowers that include ‘a high percentage’ of loans with ‘limited or alternative documentation,’ which ultimately will be packaged into bond deals without government backing.”

“Moody’s analysts expect non-prime mortgages will ‘remain an important funding source for an underserved market’ in the year ahead, including through some nonstandard loan offerings that fell out of favor with borrowers in the aftermath of the housing crisis. ‘New originators and issuers will enter this market,’ Moody’s analysts wrote, and ‘transactions backed by Helocs, closed-end second liens and loans backed by manufactured homes are likely to return.'”

“Meanwhile, more borrowers have been falling into the subprime category this year. Even with the U.S. unemployment rate at a 50-year low of 3.5% in November, this chart shows the recent decline in credit scores for borrowers who range from 30 to 59 years old.”

“Unlike U.S. stocks, the housing market is showing signs of wear and tear. ‘In many ways, the state of the housing market resembles that of a fixer upper. Some things are broken: foreign buyers are buying less, there is more supply and most importantly, affordability levels are stretched in some parts of the country,’ wrote analysts at JPMorgan & Chase in a November note to clients.”

Related Posts
This Post Has 72 Comments

  1. ‘A total of 43,232 residential properties nationwide were referred to Auction.com in Q3 2019 for a potential future foreclosure auction’

    This is what I’ve been seeing. They’ve lowered the opening bids quite a bit.

    Boom – just like that.

  2. ‘The Black Knight report shows that the delinquency rate at six months after origination is trending higher for loans originated in 2018 and 2019, with a more extreme upward trend among Ginnie Mae-securitized loans—primarily comprising VA- and FHA-backed loans. The report shows that 3.3% of Ginnie Mae-securitized loans originated over the past 12 months were delinquent at six months, up from 3.1% for loans originated in 2018 to the highest level since 2009’

    ‘Among all loan originations, the delinquency rate six months after origination was 1% for loans originated in the first quarter of 2019, up from 0.9% for loans originated in 2018 to the highest level since 2010’

    I’ve seen this too. All of a sudden, pre-foreclosure sales originated in 2018 or even 2019. This is what you would expect. (And a repeat from last decade). The further the credit envelope is extended, the weaker the buyer, and they fall on their face rather quickly.

    If you lower lending standards, you get more defaults. And they’ve done this since 2014. The bubble in prices shielded these subprime loans for a while but now shack prices are broadly falling and people are just walking away.

  3. ‘The second post-recession wave of distress emerged in 2018 as the result of a series of devastating natural disaster events—primarily hurricane-related—in 2016 and 2017 in Florida and Texas’

    Yeah, I posted a bunch on these “hurricane related” defaults including Austin and San Diego! And all of Florida had 10% of loans in some stage of default.

        1. NAR likely used the weather card on that one. “Due to the seasonal hurricanes the housing market in san diego has suffered higher defaults than expected, next years indicators show improvement in consumer confidence and a surge in property values” -Mr Yungleberry

    2. Next up will be “drizzle-related” defaults in Seattle, “heat-related” defaults in Las Vegas and “blizzard-related” defaults in Boston.

  5. If over 3% of the loans you originate are already delinquent within six months, you are doing it wrong.

    1. ‘3.3% of Ginnie Mae-securitized loans originated over the past 12 months were delinquent at six months, up from 3.1% for loans originated in 2018 to the highest level since 2009’

      So these loans were swirling the bowl in 2018.

      1. American Financing dot net promotes mortgage fraud every day on the radio in Denver. Only $1,000 down to get you into your own “home” is one I heard today.

        The level of stupid can’t get much worse than this, until it does. And it always does. Time to bring back debtor’s prisons.

      2. Considering the lengths the banks go to in order to avoid classifying loans as delinquent, I suspect that 3% are just the tip of the iceberg.

  6. ‘December 12, 2019 — ATTOM Data Solutions, curator of the nation’s premier property database and first property data provider of Data-as-a-Service (DaaS), today released its third-quarter 2019 U.S. Home Flipping Report, which shows that 56,566 U.S. single family homes and condos were flipped in the third quarter of 2019, down 12.9 percent from the previous quarter and down 6.8 percent from a year ago. After an unusually lively flipping market in the spring of this year, the declines stood out as the largest quarterly and annual drops since the third quarter of 2014’

    “After a springtime selling binge earlier this year, the home-flipping business settled way down over the summer amid a continuing scenario of languishing profits,” said Todd Teta, chief product officer at ATTOM Data Solutions. “The retreat back to more normal levels of sales comes amid broader market forces that are making it harder and harder for investors to complete the kinds of deals they were getting as recently as last year. Those forces are keeping profits way down from post-Recession highs and show no signs of easing.”

    ‘Home flips as a portion of all home sales decreased during the third quarter of 2019 from the previous quarter in 115 of the 147 metropolitan statistical areas analyzed in the report (78 percent). The largest quarterly declines in the home flipping rate came in Manchester, NH (down 40 percent); Reno, NV (down 33 percent); Salem, OR (down 31 percent); Clarksville, TN (down 31 percent) and Vallejo, CA (down 31 percent). Metro areas qualified for the report if they had a population of at least 200,000 and at least 50 home flips in the third quarter.’

    ‘The biggest quarterly decreases in MSAs with at least a population of 1 million or more were in Rochester, NY (down 29 percent); Grand Rapids, MI (down 25 percent); Boston, MA (down 25 percent); Providence, RI (down 24 percent) and Milwaukee, WI (down 24 percent). ‘

      1. Looks like Boris going to win big. Does that mean that the libs will shut up about wanting a mulligan on the Brexit vote? Can’t wait to see what 💖PJW💖 will say about this.

    3. “London property is going down faster than Lisa Page.”

      “Has Lisa Page Inherited The Mantle From Monica Lewinsky?” —Forbes

        1. She’s an attorney who stupidly used her work phone for an extramarital affair. No sympathy here.

          1. Honestly, her affair(s) are the least of her offenses. Using her office to undermine Trump is close to treason. Honestly, Russia bought tens of thousands of dollars worth of Facebook ads. The FBI looked the other way on clear criminal behavior by Hillary. It also spied on the Trump without legal cause. Also, not to mentioned but does anyone really believe that if the FBI learned about Trump plans it was not directly or indirectly reporting them to Hillary. Trump won the game with the Democrats having his playbook and knowing his signals. It was a hundred times more valuable than a small amount of Facebook ads. Probably why they do not want a rerun when they do not have spies in his camp.

          2. her affair(s) are the least of her offenses

            Agreed, but the Forbes article would like you to believe she is a victim of slut shaming on a national scale.

          3. “Honestly, her affair(s) are the least of her offenses.”

            But the illicit sex brings-out the story like a condiment.

    4. His vision attracted droves of young supporters, celebrity backing and the endorsement of other figures of the global socialist movement, with high-profile US congresswoman Alexandria Ocasio-Cortez sending a supportive tweet on polling day.

      https://www.timesofisrael.com/anti-semitism-and-brexit-shatter-corbyns-dreams-of-global-far-left-revolution/

      LOL at the Israel-hating millennial loser.

      And yet the day after they still project, and expect people to buy their bullshit…

      https://www.theguardian.com/commentisfree/2019/dec/12/donald-trump-is-attacking-both-jews-and-the-left-with-one-clean-blow

  8. Las Vegas, Dallas and Fort Collins, Colorado, Poised to Be Real Estate Hotbeds in Coming Years
    The three markets are among the top-10 metro areas in the U.S. expected to outperform, according to the National Association of Realtors|Originally Published On December 11, 2019
    mansionglobal.com/articles/las-vegas-dallas-and-fort-collins-colorado-poised-to-be-real-estate-hotbeds-in-coming-years-210148
    New report predicts strong Las Vegas housing market
    vegasinc.lasvegassun.com/business/real-estate/2019/dec/12/new-report-predicts-strong-las-vegas-housing-marke/
    🤨 They wouldn’t lie, would they?

      2. According to legend, Nathan Hale, an officer in General George Washington’s Continental Army captured by the Redcoats while on a spying mission, uttered a stirring, patriotic line just before his death at the gallows in September 1776: “I only regret that I have but one life to lose for my country.”

        It has been verified that this mythologized version of events is not entirely correct. Numerous contemporary eyewitness accounts verified that Nathan Hale paused, then added, “But what I REALLY regret is buying an overpriced shack based on Suzanne’s bogus ‘research.’ Realtors are liars.” Hearing this, dozens of members of the British garrison who were also FBs gave a mighty cheer, carried Nathan Hale to a nearby tavern on their shoulders, and proceeded to get very drunk with him while sharing heartrending tales of woe and financial ruin about being underwater on their houses. Hale then led the British soldiers to Suzanne’s Century 21 Office, where they tarred and feathered the occupants before riding them out of town on a rail.

  10. Apparently they’re going to try to hold everything together until after the election when Fannie and Freddie will be “privatized” (pumped and dumped into pension funds). Will the Feds really cut them off? The 30-year mortgage will be priced out of the market. Holy crap.

    1. The 30-year mortgage will be priced out

      And housing would miraculously revert to what working people could afford.

        1. This isn’t modern capitalism. It’s predatory capitalism, brought to you by the globalists and their political hirelings.

    1. When I was a med student I once got “jumped” by three rather petite lady grad students in the hallway of our coed dorm & found myself hanging upside down by my ankles. None of them were martial artists or particularly athletic. I still don’t get how they managed to do that. It was a prank & showed off the womanly power. Nothing else happened…

  12. Despite the globalist media waging a fear campaign ever since the Heritage British gave their globalist overlords the middle finger by voting for Brexit, the people have spoken – again. The globalists’ Labour puppets have been put on notice – again – that the British people are fed up with open borders and rule by faceless, unaccountable bureaucrats in Brussels who serve only the globalist elites.

    https://www.dailymail.co.uk/news/article-7786809/Exit-poll-shows-Boris-Johnson-track-WIN-crucial-election.html

  13. Double the QW,
    double the fun.

    The Financial Times
    Repo market
    Fed plans to double repo market intervention to avoid cash crunch
    Move comes in response to concerns of a jump in short-term borrowing costs
    Lorie Logan, senior vice president of Markets at the Federal Reserve Bank of New York, arrives for a western themed dinner during the Jackson Hole economic symposium, sponsored by the Federal Reserve Bank of Kansas City, in Moran, Wyoming, U.S., on Friday, Aug. 26, 2016. Federal Reserve Chair Janet Yellen said the case to raise interest rates is getting stronger as the U.S. economy approaches the central bank’s goals. Photographer: David Paul Morris/Bloomberg
    Lorie Logan, who was confirmed as head of the New York Fed’s System Open Market Account on Thursday, is overseeing the expansion of the central bank’s intervention in the repo market © Bloomberg
    Colby Smith in New York and Joe Rennison in London
    9 hours ago

    The US Federal Reserve will pump almost half a trillion dollars into the financial system over the end of the year, dramatically increasing intervention in the market in an attempt to avoid a repeat of September’s alarming rise in short-term borrowing costs.

    The New York markets arm of the central bank announced the measures on Thursday, amid mounting concern that banks will pull back from lending ahead of regulatory capital calculations on December 31, leaving cash in short supply.

    The New York Fed has been injecting money into the repo market, where investors borrow cash in exchange for high-quality collateral like Treasuries, for almost three months, in an attempt to stave off a shortage of short-term funding that had led interest rates to drift outside the central bank’s target range.

    The new plan includes overnight lending across New Year totalling $225bn and $190bn in longer-term repo loans, starting next week, that will provide cash to borrowers into 2020. Together with $75bn of cash already provided to the market to cover year-end, the Fed will have $490bn in lending outstanding over December 31 — close to double the scale of its recent repo interventions.

    “The Federal Reserve is just flooding the market with liquidity,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott. “That is their policy over year-end. There is no such thing as too much.”
    …

    1. ‘Jo led the campaign on the basis that she could be the prime minister – incredible. Nobody believed it. She was almost unknown.’

      1. ‘Every strategic decision. They decided to go for revoking Article 50, having ignored the referendum. They decided that they could argue that that was because we might be a majority government. Incredible, incredible – nobody believed it.

        The hubris and unaccountability of these feckless, out-of-touch globalist quislings was breath-taking. Learn something, Democrats and Establishment GOP globalist toadies.

    1. “His vision attracted droves of young supporters, celebrity backing and the endorsement of other figures of the global socialist movement, with high-profile US congresswoman Alexandria Ocasio-Cortez sending a supportive tweet on polling day.”

      A supportive tweet? Everybody knows, “Money is the Mother’s Milk of Politics.”

  17. “‘Some of the markets with the biggest inflow increases in the third quarter may be surprising given they have been rock stars of the real estate recovery of the last seven years,’ said Jesse Roth, SVP of Strategic Partnerships and Business Development at Auction.com. ‘But those markets may now be victims of their own success, with an unsustainable run-up in home prices pushing the limits of affordability for many homebuyers in recent years. Those financially stretched borrowers now have less equity cushion to protect against foreclosure, particularly if they are in a government-insured loan that came with a low down payment and down payment assistance.’”

    – You don’t say? Apparently not following this blog over the past (several) years…

    – The housing market analogy: “Rock stars”. That’s normal. There’s not much that’s less appealing that old rock stars, IMHO.

    “My My, Hey Hey (Out Of The Blue)” – Neil Young

    My my, hey hey
    Rock and roll is here to stay
    It’s better to burn out
    Than to fade away
    My my, hey hey.

    Out of the blue
    and into the black
    They give you this,
    but you pay for that
    And once you’re gone,
    you can never come back
    When you’re out of the blue
    and into the black.

  18. “Back up the truck and buy buy buy” will be financial sector touts’ “advice” to retail investor muppets. The Fed’s year-end orgy of money printing and liquidity pumping will undoubtedly take these rigged, fraudulent “markets” to all-time highs. However, the indications & warnings that the Wall Street-Federal Reserve Looting Syndicate are setting up another Great Muppet Reaping should give pause to the prudent and wary.

    https://www.marketwatch.com/story/back-up-the-truck-and-buy-buy-buy-because-there-is-no-risk-says-mufg-economist-2019-12-13-910308?mod=mw_latestnews

    1. The encouragement to “back up the truck” won’t end until the last prole goes all-in on stocks, at which point da boyz will pull the plug in the sequel to The Big Short.

  19. Portland, OR Housing Prices Crater 11% YOY As Seattle and Vancouver BC Housing Markets Turn Toxic On Rampant Appraisal Fraud

    https://www.zillow.com/portland-or-97209/home-values/

    *Select price from dropdown menu on first chart

    As a noted economist stated so eloquently, “A house is a rapidly depreciating asset that empties your wallet it every day you own it.”

    1. Makes me think all these “expert” realtors marketing to the chinese with 8’s in asking price may be out of victims. Good riddance to all this foreign money laundering / scams. No more ill gotten gains for realtor. Its back to the moonshine, ramen noodles and trash can fires.

  22. Fake news from “real” professionals. I am also a “real” and I totally disagree with the conclusions recently published on the “outstanding health” of presidential candidate Michael Bloomberg, i.e., “”Mr. 8Ioomberg is in outstanding health, He underwent coronary stent placement for a blocked coronary artery in 2000, and has had normal cardiac stress testing annually since then. In 2018, he developed atrial fibrillation in the setting of otherwise normal heart function, and for which he takes a blood thinner. Mr. Bloomberg also takes a beta-blocker and medication to control his cholesterol. He has had small skin…etc.” This is NOT “outstanding health”
    https://www.foxnews.com/politics/bloomberg-letter-doctor-outstanding-health

Comments are closed.