The level of disinformation that passes for news and commentary can still provide surprises. An article today by Reuters contains the following: “Some of the biggest jumps — such as the 10 percent year-over-year price gains in foreclosure-filled cities like Phoenix and Miami — were largely due to banks holding back inventory. That’s because of lingering legal problems from the so-called robo-signing foreclosure scandal as well as a reluctance to flood the market, according to CoreLogic’s Khater”.
This comment suggests a serious misunderstanding of the situation in Phoenix. Miami and Phoenix are very different markets, but the concept that banks are holding back inventory in Phoenix is simply false. The actual lender owned inventory is tracked down to the individual parcel and monitored by the Cromford Report and easily trackable through tax records.
There are fewer than 5,900 residential properties, and this includes some 2,600 or so that are already listed as active, pending or temporarily off market on ARMLS. The idea that an inventory of 3,300 is being artificially held back by lenders is ludicrous.
Even if by some miracle this inventory were to be placed on the market all at once, it represents less than 2 weeks supply and would have a negligible effect on prices. This number also includes homes that have been leased out to tenants by owners such as Fannie Mae and Bank of America. Miami and Phoenix should not be regarded as in similar situations.
If we compare Florida and Arizona home loan delinquency, as reported by Lender Processing Services, we see that as of the end of May, Florida had 21.3% of its first home loans 30 or more days late or in foreclosure. The equivalent number for Arizona is 8.7%, which is below the national average of 11.3%. In addition there has never been any serious evidence that lenders have held back on foreclosing in Arizona except during very brief and well-advertized periods in 2009 and 2010.
We have one of the lowest elapsed times between notice and trustee deed and a relatively low percentage of loans that are delinquent by 30 or more days but not yet in foreclosure (5.9%, which compares with a US average of 7.6%).
Do you understand the huge significance in the difference between judicial and non-judicial foreclosure states?
The robo-signing scandal was mainly focused on the states with judicial foreclosure…which is why now it has all been settled those states with judicial foreclosure processes (Florida) are seeing increases in foreclosure activity compared to last year while states with non-judicial foreclosure processes (Arizona) are still seeing declines in foreclosure activity. The decline in notices of trustee sale (foreclosure starts) in Arizona actually started a full year before the robo-signing scandal broke, and have been in decline (with occasional volatility month to month) ever since then for last 3 years.
Notices of Trustee Sale in 2009 for AZ were around 9,000 per month at their peak, in recent months they have been 4,000-5,000 per month…that’s a 50% drop in foreclosure starts. At the end of 2009 mortgage loans delinquent or in foreclosure were at about 16% in AZ….currently they stand at 8.7%…that’s also about a 50% drop. You see the correlation? Both loans that are delinquent with no notice filed yet and also those with notices filed and in foreclosures have seen 50% drops. If more and more people are falling into delinquency while banks are manipulating the market by never even starting the process with notices, then the percentage of loans delinquent but not yet in foreclosure should be growing as time goes on…not declining like they are in reality, right?
That decline in loan delinquencies, higher rates of successful short sale closings, higher rates of investors purchasing foreclosures at auctions before they hit the open market, and along with the significant benefit of being a non-judicial foreclosure state allowing us to work through them much faster than judicial states, are all the real source of our decline in foreclosures…
No conspiracy theories necessary on banks withholding inventory or market manipulation in Arizona. Show me charts for AZ to support what you say. Here’s a chart with the real story. http://tinypic.com/r/2vd5j4l/6