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Jonathan Dalton
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602-502-9693

Now Batting and Missing the Point About Phoenix Real Estate – The New York Times

Now Batting and Missing the Point About Phoenix Real Estate – The New York Times

In an article tangentially about the Phoenix real estate market with a dateline of El Mirage (apparently the newspaper industry’s doing better than thought if the Gray Lady can send reporters halfway across the country to look at for sale signs):

Five years after the housing market started teetering, economists now worry that the rise in lender-owned homes could create another vicious circle, in which the growing inventory of distressed property further depresses home values and leads to even more distressed sales. With the spring home-selling season under way, real estate prices have been declining across the country in recent months.

Wait … the New York Times just discovered this?

The reasons for the backlog include inadequate staffs and delays imposed by the lenders because of investigations into foreclosure practices. The pileup could lead to $40 billion in additional losses for banks and other lenders as they sell houses at steep discounts over the next two years, according to Trepp, a real estate research firm.

“These shops are under siege; it’s just a tsunami of stuff coming in,” said Taj Bindra, who oversaw Washington Mutual’s servicing unit from 2004 to 2006 and now advises financial institutions on risk management. “Lenders have a strong incentive to clear out inventory in a controlled and timely manner, but if you had problems on the front end of the foreclosure process, it should be no surprise you are having problems on the back end.”

Take a minute and chuckle at the idea of someone from Washington Mutual, a bank crushed by risky lending practices, to now be advising anyone on risk management.

Done? Okay …

It’s May of 2011. We’ve been hearing this same old song of banks under siege for more than three years now. Three years! That’s an entire non-Rapture ago! If it’s still the case, it’s pathetic. And if it’s not, then these “experts” need to come up with a new theory.

Maybe there will be some sanity in the numbers reported …

A drive through the sprawling subdivisions outside Phoenix shows the ravages of the real estate collapse. Here in this working-class neighborhood of El Mirage, northwest of Phoenix, rows of small stucco homes sprouted up during the boom. Now block after block is pockmarked by properties with overgrown shrubs, weeds and foreclosure notices tacked to the doors. About 116 lender-owned homes are on the market or under contract in El Mirage, according to local real estate listings.

That’s a pretty big or. As of this morning there are … wait for it … 32 bank-owned homes for sale in El Mirage. Median time on market? Three weeks. Average time on market? Six weeks. Oh, the humanity!

There are another 69 bank owned homes under contract, the other half of the or. The New York Times would have you believe this is a bad thing when, as I think you’ve figured out, it means these homes soon will have new owners.

But that’s just a small fraction of what is to come. An additional 491 houses are either sitting in the lenders’ inventory or are in the foreclosure process.

Pretty bad stuff, right? Oh, wait … I forgot. There are nearly 11,000 single family detached homes in El Mirage according to the tax records. So this means just over 4 percent of the homes in El Mirage are either owned by the bank and not yet for sale, or are in the “foreclosure process” which means, presumably, that a Notice of Default has been filed.

Since not all homes on which a NOD is filed actually go through a Trustee’s Sale … well, now we’re only guessing at what 4 percent might mean. What I can tell you is the 4 percent means that 96 percent of the homes in El Mirage are neither bank owned nor in the midst of the foreclosure process.

As a journalism major and one-time reporter, I’ve often said you can’t necessarily blame reporters for not knowing the little details. You have a beat, you learn enough to be able to report authoritatively enough for your audience and that’s sufficient.

But I’ll tell ya, I’m getting to the point where it’s harder and harder to give these folks leeway. They can find these numbers just as well as I can. The problem is, at no point does the reporter take the raw number – 491, or 119 or whatever – and try to figure out what it really means.

It’s like Frankenstein and a torch … “Aaaarggghh … Big number … baaaaaaaad.

On average, homes in El Mirage sell for $65,300, down 75 percent from the height of the boom in July 2006, according to the Cromford Report, a Phoenix-area real estate data provider. Real estate agents and market analysts say those ultra-cheap prices have recently started attracting first-time buyers as well as investors looking for several properties at once.

Recently? Again, where the hell have you been, buddy? We first dropped to four months or less of inventory in April 2008. We’ve been a little higher. We’ve been a little lower. But there have been first-time buyers and investors looking at this market for the past three years. Just ask a reporter to run the sales numbers for you and you’ll see for yourself. It’ll take a little bit … what’s the word … work, but it might be enlightening.

“My biggest fear right now is that the supply has been artificially restricted,” said [name redacted], a local broker [actually an agent, not a broker, but still]. “They can’t just sit there forever. If so many houses hit the market, what is going to happen then?”

Redacted, Redacted, Redacted … rumors of the “next wave” of foreclosures hitting the market en masse have been swirling since March 2008. Please tell me you’re not spending your day wringing your hands waiting for the tsunami that has never appeared. A couple of months, maybe a year … but three years and you’re still waiting for it?

Really?

One last misstatement and we’ll call it a day.

The biggest reason for the backlog is that it takes longer to sell foreclosed homes, currently an average of 176 days — and that’s after the 400 days it takes for lenders to foreclose.

Lenders can file an NOD as soon as their clients are in default and typically once the home owner is 90 days behind. From the day the NOD is filed, at least in Arizona, the Trustee’s Sale is scheduled 90 days out.

90 + 90 = 180 days. Not 400.

Folks, I’m trying my best to get out of this admittedly cynical rut. I’m trying to find the positive out there. But I’ll tell ya, the more I see from both the mass media and other niche outlets (yep, an Inman News rant is in the works), it’s getting harder and harder.

And for one simple reason … I know better, so I can ignore it. Or at least shake my head slowly over the sheer stupidity of it all. But others, who aren’t in the market, who may be elsewhere in the country just looking to see what’s happening … they’re getting a ton of outright terrible information, as evidenced above.

Not that we should expect anything better from the mainstream media. But a boy can dream.

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