Why The Housing Market Has NOT Hit Bottom!


LPS (Lender Processing Services) “First Look” Mortgage Report: December. They are like the big housing database in the sky.

LPS reports the following “first look” at December 2011 month-end mortgage performance statistics derived from its loan-level database of nearly 40 million mortgage loans.

Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure): 8.15% – this means 3,260,000 homes will likely go to foreclosure in the next year
Month-over-month change in delinquency rate: 0.0% – zero improvement
Year-over-year change in delinquency rate: -7.7% – getting better, but sheesh – that’s like saying there were only 92,000 murders this year instead of last year’s 100,000
Total U.S. foreclosure pre-sale inventory rate: 4.11% – That is up 2.5% from November and a yearly increase in the foreclosure rate of 9.4%. The point is it is GROWING, not shrinking.

Number of properties that are 30 or more days past due, but not in foreclosure: (A) 4,101,000 – it takes about 6 more months to move to foreclosure and then 3 months to foreclose.
Number of properties that are 90 or more days delinquent, but not in foreclosure: (B)1,792,000
Number of properties in foreclosure pre-sale inventory: (C) 2,066,000
Number of properties that are 30 or more days delinquent or in foreclosure: (A+B+C) 8,233,000  or  21% of ALL mortgage  loans will likely be in foreclosure sometime between August and February of 2013!

So, imagine trying to sell your perfectly good $300,000 home while competing with RE Owned Bank sales of the two houses on your street that are priced at $200,000 or less. See? THAT is why all these economists who talk about the housing recovery building a floor and starting to improve are apparently hopeful optimists.

Sure, housing sales were up 5% in December, but when you drill down into those numbers you find this: Of all purchases, cash transactions accounted for about 31 percent, up from 28 percent in November. Distressed sales, comprised of foreclosures and short sales in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 32 percent of the total in December, up from 29 percent a month earlier. So, if you combine distressed sales with cash transactions (usually also for homeowners in trouble) you get a 1.8% increase in normal home sales; not 5%, and you can’t put lipstick on that pig.

Also, investors accounted for 21% of purchases last month, an increase from 19% in November, so if you assume investors are buying at what they consider to be the bottom, you really have a NORMAL housing sales increase of … .8%!!! I don’t think this should get anybody’s blood flowing, do you?

States with highest percentage of non-current* loans: FL, MS, NV, NJ, IL
States with the lowest percentage of non-current* loans: MT, WY, SD, AK, ND
*Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state.

(1) Totals are extrapolated based on LPS Applied Analytics’ loan-level database of mortgage assets
(2) All whole numbers are rounded to the nearest thousand


About Steve King

iPeopleFINANCE™ Chief Operating Officer. Former CEO of Endymion Systems, Inc. a $36m Information Systems Services company. Co-founder of the Cambridge Systems Group, the creator of ACF2, the leading IBM Mainframe Data Center Security product; acquired by Computer Associates. IBM, seeCommerce, marchFIRST, Connectandsell alumni. UC Berkeley alumni. View all posts by Steve King

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