Trustee deeds and notices of default were back at 2005-2006 levels in 2013 -- and a cycle like that of the past seven years is not expected to recur in the near future.
“I don’t expect a cycle like this again at all for the foreseeable future,” said Nathan Moeder, principal at The London Group. “I know some people are saying this is a housing bubble and it’s smelling a lot of 2004-2005 and things are getting heated – well the answer is: there’s a lack of inventory.”
The lack of inventory -- which is making it feel like the housing market is heating up -- is because people aren’t building homes and there are still underwater homeowners who aren’t selling, Moeder said. In the past, there were poorly underwritten mortgages with 90 to 100 percent loan-to-value loan terms. Today, there’s a 20 percent down payment requirement and incomes have to be verified.
“I don’t see the cause for another bubble because these loans are being underwritten and [they’re] making sure people buying homes can afford the homes,” Moeder said.
There were 7,614 notices of default issued in 2013, down from 16,597 in 2012. Notices of default reached a peak in 2009 when lenders issued NODs to 38,308 borrowers. This year’s number is the lowest since 2005 when there were 5,080 NODs issued.
There were 3,236 trustee deeds filed in 2013, down from 7,195 in 2012. Trustee deeds reached a peak in 2008 when they were filed on 19,575 properties. This year’s number is the lowest since 2006 when there were trustee deeds filed on 2,065 properties.
Fewer distress in the market is healthy for the economy, said Dee Marie Fisher, Realtor at Windermere Homes & Estates. It gives consumers confidence to spend more money, including purchases for home improvement. There is also less competition from investors, she said.
Trustee deeds — the final step in the foreclosure process, transferring ownership from the delinquent borrower back to the lender or a third party — were filed on 148 properties in December, 33.6 percent lower than in November and 66.7 percent lower than December 2012, according to the San Diego County Assessor's Office.
Notices of default (NODs) — which initiate the foreclosure process by registering that a borrower is behind in payments — decreased 4.9 percent from November to December, and fell 54.2 percent from December 2012 to December 2013.
Lenders issued NODs to 448 borrowers in December, down from 471 in November and down from 978 in December 2012.
The riskiest loans have been foreclosed on already, which is one factor contributing to the decline in NODs and trustees deeds, Fisher said. There have also been changes to the short-sale requirements, which allow for quicker sales, and incentives given to homeowners who choose to short sale their homes.
Job stabilization in 2013 helped stabilize the housing market and caused the level of distress to become smaller and smaller, Moeder said.
“The only way I see distress and foreclosures coming back is if there is a major economic catastrophe and we start to lose jobs again in the millions of numbers,” Moeder said. “If we lose 2,3,4 million jobs -- yeah, we’ll have trouble in the housing market. If jobs remain stable and loans are underwritten the way they should be, I don’t expect distress to go up again.”