Housing Doom

As foreclosures rise in Phoenix and properties are returned to the lender, the question arises as to what percentage of the market is actually "lender owned."

L thoughtfully checked the numbers for us a couple of days ago, but reminded me that these numbers have their limitations.  The MLS has a couple of boxes now in the Phoenix area that agents can check for "lender owned" and "lender approval required".  "Lender owned" typically would be homes now owned by the bank, and "lender approval required" would typically be "short sales"- properties that still belong to the homeowner, but the homeowner owes more than than the house is now worth, so they need lender approval to sell the home.

It is not mandatory to check these boxes, and sometimes agents will check both.  As always, the MLS is not a perfect database.  However, the numbers are probably close enough to give us some indication of how the market has been impacted by these properties.  Here’s the numbers:

Total number of properties found: 7034 Total Active Lender Owned. or Lender approval required
 
Total number of properties found: 4206 Active Lender approval required
 
Total number of properties found: 3909 Active Lender Owned
 
Total number of properties found: 55482 Active

[The numbers don't add up as some agents input both.]

So we’re probably looking at around 13% of listings are "lender owned" or "lender approval required."  What about the properties that actually sell though?  What kind of percentages are we looking at there?

Total number of properties found: 558  SOLD Lender approval required / or Lender owned 1/1/2008 to 1/31/2008
 
Total number of properties found: 2912  Total reported sold 1/1/2008 to 1/31/2008 

So while lender owned/approval required makes up around 13% of listings, it looks like they make up around 19% of sales.  I think it is probably fair to say then that about one in five homes selling in Phoenix now is selling for less than the mortgage- which has implications for not only neighborhood comps, but for lender losses as well.

Read the rest of this entry »

Losses, losses, who’s got the subprime losses?  According to Ambrose Evans-Prichard of The Telegraph, it just might be Japan:

Just as battered investors had begun to glimpse signs of recovery in America, the next shoe has dropped with an almighty thud in Japan. Echoes are rumbling across the Far East.

The Tokyo bourse has crumbled, suffering the worst start to the year since the Second World War. The Nikkei index is down 17 per cent since Christmas, and the shares of Japanese banks are leading the slide. Mizuho Financial, Mitsubishi UFJ and Sumitomo Mitsui have all been punished as hard or even harder than those US banks at the epicentre of the sub-prime debacle.

The nagging fear is that Japan’s lenders - the conduit for the world’s greatest stash of savings - have taken on a far bigger chunk of mortgage securities, collateralised loans obligations and other exotica from America’s structured credit boom than they have yet revealed.

Americans and Europeans have so far confessed to $130bn of the estimated $400bn to $500bn of wealth that has vanished into the sub-prime hole. Somebody, somewhere, must be sitting on a vast nexus of undisclosed losses. We may find out soon enough whether the hold-outs are in Japan. The banks have to come clean under the country’s strict new audit codes by the end of the tax year in March.

The subprime pain has clearly gone global:

"Recession is a clear and present danger in Japan," said Tetsufumi Yamakawa, chief Japan economist for Goldman Sachs. "The leading indicators are deteriorating very sharply. Inventory is piling up at a rapid pace. There are clear signs of deceleration in exports of steel and semi-conductors to China," he said.

Yes, China. It turns out that the intra-Asia trade that was supposed to immunise the region against a slump is a disguised supply-chain ending up in the US market. American shoppers still make 30 per cent of global demand, just as it did a decade ago. Nothing has really changed.

What has changed is that we’re about to find out where, and how big the mortgage losses really are- and the reach will extend far beyond Wall Street.