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Jobs help county foreclosure indicators continue downward trend

The county’s notices of default decreased in March from February after a steep jump during the prior month.

NODs decreased 11.4 percent in March from February after jumping more than 50 percent from January to February.

Alan Gin, economics professor at the University of San Diego, said January was an “aberration” because its numbers were artificially low, causing February’s numbers to be artificially high. He said he expects the numbers to settle into a more normal pattern and won’t have that volatility in the future.

Alan Nevin, principal at The London Group, said NODs can be “misleading” because lenders can send out a lot in one month.

“The number that really counts is the trustee sales. And they are almost back to normalcy,” Nevin said. In a normal market, he said there are a couple hundred trustee sales each month.

Trustee deeds -- the final step in the foreclosure process, transferring ownership from the delinquent borrower back to the lender or to a third party -- were filed on 320 properties in March, 3.6 percent less than in February and 56.7 percent less than March 2012, according to the San Diego County Assessor's Office.

Gin said these numbers continue the trend that “distressed properties are becoming less and less of a problem” and the year-over-year numbers show that things are less problematic on the foreclosure front.

“Most of the trustee sales that we have had here are related to loan originations in 2007 and 2008. If you look at the loan origination dates on the trustee sales that we’re seeing now, they’re just the normal ones that occur in any housing market at this size,” Nevin said. “There’s always a certain number. It never goes down to zero. If you’re in an economy where we have about 750,000 homes and condominiums in a county that when you see foreclosures of 200 per month or 250 per month, it’s pretty insignificant.”

Notices of default (NODs) -- which initiate the foreclosure process by registering that a borrower is in arrears of payment – fell 11.4 percent from February to March, and dropped 62.3 percent from March 2012 to March 2013.

Lenders issued NODs to 669 borrowers in March, down from 755 in February and down from 1,773 in March 2012.

The job market is the key to why NODs and trustee deeds are decreasing, according to Nevin.

“The strength of the job market is such that few folks are losing their homes because of a lost job now, where that certainly wasn’t the truth two or three years ago,” Nevin said.

Gin also said the improvement in terms of jobs may have helped the numbers come down. He also attributed it to home prices, which have gone up and, as a result, fewer people are underwater and those who are still underwater are closer to breaking even and “less likely to walk away from their homes,” he said.

Gin added that the “bulk of the damage” has already been done in terms of foreclosures.

Home prices are increasing “faster than anticipated,” Nevin said, which could help bring down the number of NODs. Single-family home prices increased 14 percent in the first quarter of 2013 compared to the first quarter of 2012, Nevin said. The price of condominiums has increased 20 percent in that same time period. The price increases were in ZIP codes across the county, he said. Ranking in the top 10 increases included Escondido, North Park and San Marcos.

“This one year jump is sort of a catch up. We’re basically saying this coming year will go up 8 to 20 percent. It’s back to normalcy,” Nevin said.

Gin said he expects the NODs and trustee deeds to continue their downward trend “unless serious problems develop related to the sequester.” If sequestration affects the labor market, it could have some impact, Gin said.

“My thought is that the economy is in a position that it could fight through the negative impacts of the sequester,” Gin said. “[NODs and trustees deeds] are at relatively low levels. They may not decline every month, but I think they’ll remain at relatively low levels here. You reach a point where you probably can’t go much lower.”

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