Posted by: union03g | June 30, 2009

The Media Says Forclosures Are Easing… And Couldn’t Be More Wrong.

Optimism is trendy right now because people are tired of the doom and gloom housing data, but that doesn’t mean it’s accurate. The media lately has been cherry-picking positive material where they can find it and reporting it as breakthrough data. Check this out. The below chart shows the three stages of foreclosures from beginning, middle and end with blue, red and white, respectively.

  1. Notice of Default (NOD) – stage 1.
  2. Notice of Trustee Sale (NTS) – stage 2
  3. Foreclosure – stage 3

The media has reported that NOD (stage 1, blue) has decreased, which is true BUT that is mainly due to the recent “Obama loan modification program” which is going to see re-default increases into the beginning of 2010. It’s only a temporary seize fire on default notices, that’s all. The NOD 6 month average is way up too, but the media forgot to mention that. The media has been excluding coverage on the meteoric rise in NTS (stage 2, red) and foreclosures. Ultimately, when the re-defaults hit from the failed Obama refinances/modifications, there will be no positive spin to find. Next super scary chart.

new-bar-all-3-stages-1

This is California, our collective guinea pig for real estate analysis. I assume they are a leading indicator of what is to come in other areas, albeit to a lesser degree. Total house sales volume are trained within a support and resistance while the second tidal wave of foreclosure activity rolls in. This is the infinite supply problem of housing – inventory dumping back onto the market with no absorption. We have to motivate investors to buy up these foreclosures, either with tax incentives (circa early 80’s) or better analytical technology, because as long as foreclosures exist en masse, confidence can’t return. Now watch this chart come to life!

foreclosure-v-sales-br

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