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“Foreclosure Rebound Pattern”: Foreclosure Starts SUDDENLY Jump 57% in California (And Soar In Much Of The Country)

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Wolf Richter   www.testosteronepit.com   www.amazon.com/author/wolfrichter

From Federal-Reserve-fueled bubble to debilitating return to reality – reality being a financial calamity – to Federal-Reserve-hyper-fueled bubble: that’s the US housing market over the last ten years. There are many places around the country, including some cities in Silicon Valley, where home values are now higher than they were at the peak of the last bubble. Of course, no one at the Fed or in government calls it “bubble.” They’re talking about the housing “recovery.”

But the excesses and speculators are back, and private equity funds and highly leveraged REITs are all over it, buying up every single-family home in sight, and now Wall-Street-engineering firms have come up with a new and improved contraption, a synthetic structured security that on its polished surface looks like that triple-A rated mortgage-backed toxic waste that helped blow up the banks. But this time, it’s different. The securities are backed by sliced and diced rental payments from single-family homes that are, hopefully, rented out [read.... Another Exquisitely Reengineered Frankenstein Housing Monster].

So wither this “recovery?”

Foreclosure filings – default notices, scheduled auctions, and bank repossessions – suddenly jumped 8% to 124,419 in January across the nation, according to RealtyTrac. Which left some people scratching their heads. A mild uptick was expected after the holidays, but 8%? And what about the polar vortices – weren’t they supposed to have slowed things down to a crawl?  

OK, foreclosure filings were still down 18% from a year earlier, the 40th month in a row that they declined on an annual basis. But it was the smallest annual decline since September 2012. And the 8% jump from December was the largest such increase since May 2012. Crummy as they were, these national averages covered up some, let's say, interesting phenomena in a number of states.

“The sharp annual increases in some states shows that many states are not completely out of the woods when it comes to cleaning up the wreckage of the housing bust,” said RealtyTrac VP Daren Blomquist. “The foreclosure rebound pattern is not only showing up in judicial states like New Jersey, where foreclosure activity reached a 40-month high in January, but also some non-judicial states like California....

Ah, my beloved state of California. Housing has been booming, and prices in coastal areas have been soaring – along with rents, to the point that mini-rebellions are breaking out. In this hyped and glorified housing market where the Big Money rules and where first-time buyers have been shoved aside unceremoniously, where foreclosure starts in 2013 had plunged 60% from 2012, and had declined year-over-year for 17 months in a row, or with the exception of five months, had declined four years in a row, well, in this wondrously recovered housing market, foreclosures starts in January suddenly jumped 57%.

It’s not just in California. Foreclosure starts rose 10% from December to hit 57,259 properties across the country. That they on average were still down 12% from a year earlier obscured major annual increases in certain individual states, and not just in one or two, like us crazies out here in California, but in 22 states! And California with its 57% jump in foreclosure starts now suddenly seems tame: In New Jersey, they soared 79%, in Connecticut 82%, and in Maryland 126%!

The cynic in me says the sudden and dizzying jump in foreclosure starts, not only in California but in much of the country, must be some kind of data problem. Maybe RealtyTrac’s computers got hacked by some evildoer who was short the housing market or something. But when I contacted RealtyTrac to request permission to republish the chart, there was no word of a retraction, though this would have been a good opportunity, and so the numbers hold.

Maybe foreclosure starts in February and March will somehow, miraculously, plunge and return to trend. Maybe January was just a fluke. But that may be wishful thinking. Instead, it could be the indication of a turning point of sorts, like some of the other indications we’ve already observed, and maybe the strange sound that we’re hearing out there is the hot air hissing out of this whole construct, so carefully inflated by the Fed, and so assiduously taken advantage of by private equity funds and other Wall Street outfits with access to the Fed’s nearly free money.

Meanwhile, my beloved state of California, whose $2 trillion economy is the eight largest in the world ahead of Italy and Russia, has a new problem: it’s awash in cash. It’s projecting multi-billion dollar surpluses for years to come. The feeding frenzy in Sacramento is a sight to behold. Read.... California MUST Have Magnificent, Endless Bubbles in Housing, Stocks, And IPOs – Or Go Broke Again

 

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Sun, 02/16/2014 - 12:54 | 4442173 spencer
spencer's picture

 

I wish these figures were accurate - because Realtytrac says something contrary to what is being reported above:

"In January, the number of properties that received a foreclosure filing in CA was 7% higher than the previous month and 18% lower than the same time last year."

http://www.realtytrac.com/statsandtrends/ca/?address=CA&parsed=1&stc=ca

So next time you say something like California Forclosure starts show "57%" jump in forclosures - please provide a number - and make sure that jump is indeed a jump in the direction describbed.

Fri, 02/14/2014 - 18:39 | 4437885 usednabused
usednabused's picture

duplicate deleted

Fri, 02/14/2014 - 18:35 | 4437884 usednabused
usednabused's picture

Not really andrew, The banks are just in a position to be able to foreclose now. They've been using the original purchase price figure on these properties as book value in their accounting schemes since the housing collasped. Why do you think it was mainly lower dollar houses foreclosed on in years past? They needed to maintain enough on their abalance sheets to keep the regulators happy. Not that it'd take much there. But thats the reason why people lived for years in their underwater houses with no payments made. Enough years for the banks to steal enough from the markets to be able to unload more inventory.

Fri, 02/14/2014 - 10:52 | 4436294 andrewp111
andrewp111's picture

It is probably just the backlog being cleared. House prices have risen back enough that banks switch from "extend and pretend" to  "foreclose and get what you can". They want to cash in on the price rises and clear the backlog before the next recession. If you figure that the forclosure process will take the better part of a year, the banks are wise to start now.

Fri, 02/14/2014 - 19:39 | 4438079 goldinpenguin
goldinpenguin's picture

Agreed and the tax break for homeowers short selling recently expired so that is an incentive to just throw the keys and walk away, fugeddabout the headaches of negotiating ashort sale with banksters

Fri, 02/14/2014 - 18:01 | 4437787 Missiondweller
Missiondweller's picture

That was exactly my thought. Its like there was a December meeting by the banksters planning 2014 who decided it was time to liquidate while the going is good.

Fri, 02/14/2014 - 10:28 | 4436223 drendebe10
drendebe10's picture

Its Bush's fsult.

Mon, 02/17/2014 - 18:21 | 4445898 dvfco
dvfco's picture

This isn't a /sarc.  The misspelling made it even funnier!

Fri, 02/14/2014 - 10:18 | 4436199 Duude
Duude's picture

Far too many are still completely unaware housing is still in a recession of sorts. Yes, prices have risen, but that's ONLY because homebuilders have been in a building depression for 5 years now. Don't take my word for it----Check out the census for the building rates for the 40 years through 2007 and the sharp decline since. My point is buying a home in the current environment comes with a dismal valuation outlook in future years.

Fri, 02/14/2014 - 10:01 | 4436153 corporatewhore
corporatewhore's picture

what i find interesting in my midwest city is that foreclosure listings are being priced at above comparable listings and not discounted one bit.  I tracked one english tudor style home that was fsbo in June of 2013 for $150k and couldn't sell.  Bank forecloses, lists at 200k and it sells within days.  This home should have just sat for months.  Needed work.

Fri, 02/14/2014 - 09:54 | 4436132 JimboJammer
JimboJammer's picture

I  see  all  these  comments , . . nobody  gets  it ....  it  is  all  about  Fukushima .  the  california  coast  is  un-safe ..

Radiation  makes  the  houses  un-inhabital .  .  don't  eat  any  fish  from  the  Pacific  Ocean .   . not  good...

Fri, 02/14/2014 - 15:48 | 4437343 Nick Jihad
Nick Jihad's picture

You should inform yourself about the rediation dose that you receive whenever you fly in a jet. For that matter, you may wish to become aquainted with the radiation profile of various types of masonry. Oh, and be sure to view all those youtube videos of the freakish genetic monsters that inhabit the surroundings of Chernobyl.

Fri, 02/14/2014 - 17:04 | 4437601 jomama
jomama's picture

you should inform yourself about radiation exposure vs. contamination.

Fri, 02/14/2014 - 10:54 | 4436314 Toolshed
Toolshed's picture

Fukushima IS the greatest threat to man's survival in our known history, BUT, it is not having a significant impact on the US real estate market at this point in time.

Fri, 02/14/2014 - 12:08 | 4436538 SAT 800
SAT 800's picture

Because you said so? that's all that's necessary? that you listen to the voices insdie your tinfoil hat. You're completely out of touch with reality.

Fri, 02/14/2014 - 11:39 | 4436458 forwardho
forwardho's picture

it is not having a significant impact on the US real estate market at this point in time.

Can we agree that it may be having a significant impact on the residents?

Fri, 02/14/2014 - 09:34 | 4436083 AdvancingTime
AdvancingTime's picture

I have owned an apartment complex for many years and we are currently experiencing the largest number of vacancies we have ever had. Many houses in the area are empty or under leased. In 2005 and 2006 prior to the housing collapse many people were looking at second homes, for investments or as a vacation getaway.

Today they have shed the extra home and have doubled up with family or friends. We are pushing on a string and calling it demand when someone who can barely pay the rent is encouraged by the government to buy a house they can neither afford or maintain. We have a shortage of "qualified" buyers and renters. More on why super low interest rates are a disservice to housing below,

http://brucewilds.blogspot.com/2013/12/super-low-interest-rates-disservi...

 

Fri, 02/14/2014 - 17:54 | 4436082 RECISION
RECISION's picture

A big jump in foreclosures...

So, for some reason, it seems it is a good time to foreclose NOW - rather than previously, or waiting longer...?

Hmmm... why would that be...?

There wouldn't be some sort of statute of limitations effect rolling into play here - would there?

Or is it as simple as trying to sell into some sort of rising market, rather than one that's in free-fall.

Fri, 02/14/2014 - 09:32 | 4436074 NEOSERF
NEOSERF's picture

Just look at the huge layoff annoucements, particularly at banks...having read the WSJ for 23 years, I can say that these types of layoffs ALWAYS precede a bad period...the banks are always ahead of that curve (hell, they might be creating the curve)...this housing data is just the start...Yellen will have a (not so) difficult decision to make this summer...halting taper.

Fri, 02/14/2014 - 09:14 | 4436019 Saratoga
Saratoga's picture

Mortgage applications are less than half of their peak. How are home prices rising? Wages are down across the board? How are home prices rising? The banks have to been holding foreclosures back because money is not moving.

Fri, 02/14/2014 - 18:13 | 4437824 Missiondweller
Missiondweller's picture

Foreign investment (CHinese) and housing REITs

Sat, 02/15/2014 - 09:34 | 4439154 new game
new game's picture

42 % cash sales for 2013! off the charts-insiders buy distressed assets from banks! do you see the trend?

think...

Fri, 02/14/2014 - 12:53 | 4436681 Vendetta
Vendetta's picture

"Wages are down across the board? How are home prices rising?"  Magic

Fri, 02/14/2014 - 06:28 | 4435785 olenumbersix
olenumbersix's picture

I own a small buisness that deals with a LOT of realitors and they are telling me that lack of inventory is an issue, that they are buried in work ( central florida ) Not sure on my read but lots of homes here where people have been living in the home for YEARS while they wait on the banks to come toss them to the curb, and a lack of inventory smells like the banks starting to clear bad loans off their books ? Some of these numbers may sugest this is at least part of what we are seeing ? tired now much thinking make me sleep........................

Fri, 02/14/2014 - 04:11 | 4435681 knowshitsurelock
knowshitsurelock's picture

This time is different though.  It's the weather's fault.

Fri, 02/14/2014 - 03:17 | 4435631 -NaN-
-NaN-'s picture

Let the government handle this one.  They did a bang up job last time.  

HUD ANNOUNCES NEW REGULATIONS TO PROVIDE $2.4 TRILLION IN MORTGAGES FOR AFFORDABLE HOUSING FOR 28.1 MILLION FAMILIES

http://archives.hud.gov/news/1999/pr99-131.html
http://archives.hud.gov/news/2000/pr00-317.html


Fri, 02/14/2014 - 00:35 | 4435363 Hongcha
Hongcha's picture

Wait until the ACA "penalties" hit.  May the ACA be relegated to the dustbin of technocratic history where it belongs.

Fri, 02/14/2014 - 00:35 | 4435360 W74
W74's picture

I'm a Marylander and I've long waited for this.  This state "weathered" the foreclosure storm of the late 2000s for a few reasons, by A. just not foreclosing on properties and allowing the deadbeats to continue to dwell in them; B. a hugely disproportional amount of public sector jobs (and those which are labeled private sector but are government contractors and make the vast majority of their coin off the labor of taxpayers); and C. Welfare.

But now chickens are coming home to roost, I believe.  There's no more hiding it, no more holding it off and prolonging the pain.  Though I recently landed a new job, there is really no economy here to speak of as far as the private sector goes. 

Fortunately, for those who choose to, the small area (we're smaller than San Bernardino county, CA; and about 6/5ths of Sweetwater county, WY) and odd shaped borders allow people to easily flee to other states the more Annapolis' clamp of oppression tightens down.

But bring on the foreclosures.  I've been seeing those inspection papers piling up on windows and doors.  Many are empty.  Many a good house destroyed, even out in the burbs.  Baltimore city and swaths of PG county are a war zone as it is, where it seems there are just as many vacant row homes as there are people milling about; living but not living.

Fri, 02/14/2014 - 09:38 | 4436093 AdvancingTime
AdvancingTime's picture

Lots of empty homes and apartments here in the Midwest also.

Fri, 02/14/2014 - 12:26 | 4436608 monad
monad's picture

Al Gore did forecast an increase in Jewish lightning. 

Thu, 02/13/2014 - 23:25 | 4435185 TheRideNeverEnds
TheRideNeverEnds's picture

Face meltingly bullish news!  This should be good for another 20 or so points in the ES tomorrow wouldn't you say? 

Thu, 02/13/2014 - 23:40 | 4435213 AngelEyes00
AngelEyes00's picture

I'm confused.  Down from this time last year, but higher recently?  Either it's up or it's down.  What's the net difference?  Up or down?

Fri, 02/14/2014 - 02:27 | 4435602 kurt
kurt's picture

Its Upown and Dup or not or is or isn't positivly negatively positive . Not Is ...blerp.

Fri, 02/14/2014 - 03:48 | 4435661 StychoKiller
StychoKiller's picture

Looks like you need to hit CTRL-ALT-DEL on yer brain, simply poke one eye, grab one ear lobe and stick a finger up yer nose! :>D

Fri, 02/14/2014 - 00:34 | 4435367 MontgomeryScott
MontgomeryScott's picture

In the heady days back in '06, before I had read Zero Hedge at all (probably due to the fact that I don't think it existed), I was studying the charts and data of several others (who were yelling about the coming collapse that no one said would happen). It got me in to a lot of trouble with my girlfriend, who insisted on buying the second house of hers right then (I tried to warn her, and she got really pissed at me, and we ended up breaking up, and i think she might have lost both of her houses by now).

ANYWAY, I remember some prognosticators describing the second wave of foreclosures that SHOULD have begun in '12-'13 according to them (back in the '05 and '06 years of forward prediction). Naturally, they could not have predicted or accounted for the extreme and illegal interventions taken by the government and the fiat-currency printer partner the FED, back then, so if they were off by a year or two on their predictions, I DO understand. HOWEVER, their mathematical models looked fairly sound.

The two waves were to have been in 2007-2009, followed by 2012 on, extended to about the 2017 year gradually dropping (in order to make enough correction to re-stabalise).

Foreclosure INCREASES are DOWN; I mean, increases in foreclosure rates are UP, but LESS UP than they were last year. You don't understand the new math metrics of government accounting practices, even NOW, do you? A BUDGET CUT ("SLASHING the BUDGET", THEY like to state) means that the INCREASE in the BUDGET is LESS than was PROJECTED (or WANTED). They SPENT MORE, but it was LESS than the MORE they wanted to; hence, they SPENT LESS.

Housing foreclosure reporting statistics follow this same accounting model (because they are revealed for public consumption by BANKS who HOLD the NOTES, not the LEAST of these is now the FEDERAL RESERVE SYSTEM ITSELF).

I hope that this helps in your search for non-confusatory news.

Fri, 02/14/2014 - 04:00 | 4435670 -NaN-
-NaN-'s picture

She got the house, you kept your balls (attaboy).   She probably lured some new sucker boyfriend to "invest" in her future foreclosure, ha!

Fri, 02/14/2014 - 09:29 | 4436063 NEOSERF
NEOSERF's picture

He would be the "suckee" boyfriend

Fri, 02/14/2014 - 01:12 | 4435451 ThroxxOfVron
ThroxxOfVron's picture

"They SPENT MORE, but it was LESS than the MORE they wanted to; hence, they SPENT LESS."

Just to clarify: More but Less than MOAR.

 

I've been doing Moar with Less for awile now.

-DON'T get Me wrong.   Some things are NOT permissable; but, I'll not bore You All with salacious detail... 

Honestly: the arrangement is better than arguing with Less over Moar and Moar over Less...

 

Thu, 02/13/2014 - 22:21 | 4434987 Teabunny
Teabunny's picture

...or, it could be that when the unemployment benefits were held up for the month of january... people just treading the 60 days past due mark...living check to check, fell off into 90 days past due... and boom... there it is. naw, couldn't be the hostage situation boehner chose as where he would make a stand... I mean, not obamacare, immigration, debt celing... smh. clueless old geek. 

Fri, 02/14/2014 - 04:01 | 4435674 -NaN-
-NaN-'s picture

Everyone knows it was because of the weather.  

Fri, 02/14/2014 - 07:32 | 4435854 new game
new game's picture

manipulation, simply unloading into low interest, low supply market. incomes flat, but interest rates are the wild card.  but not really as ol yeller can buy the mofo ten and keep the whore street happy, happy...

Thu, 02/13/2014 - 22:57 | 4435122 Dead Man Walking
Dead Man Walking's picture

Teabunny, that is probably exactly it, ending extended unemployment benefits just pushed a million families past the 45-60 day mark which is where most banks start foreclosure.  And per the post below on exponential growth, this problem will grow exponentially because everyday unemployment benefits are ending for more people, while job growth is non existent, and new unemployment claims are rising. Uggh, I feel terrible for those families, but I also know it will hurt us all.  Wonder how much of this is due to Obamacare.

Fri, 02/14/2014 - 13:59 | 4436894 andrewp111
andrewp111's picture

No way. banks don't move that fast. The cutoff of UI shouldn't produce foreclosures until at least July. The surge has to be from shadow inventory that was being held back by the banks to avoid crashing the market, and they have calculated that they need to start unloading it now.

Fri, 02/14/2014 - 15:00 | 4437142 Teabunny
Teabunny's picture

so, to avoid crashing the market... they held them back, to unload at once, crashing the market? hmmm...

and they do move that fast. once it is in foreclosure, they get to write of the intrest as P&L 

Fri, 02/14/2014 - 20:21 | 4438188 Freddie
Freddie's picture

It may be something where the banks got Govt/Fed money or a write off to HIDE the shadow inventory. Maybe this money or loophole went away in January.

Fri, 02/14/2014 - 15:00 | 4437141 Teabunny
Teabunny's picture

so, to avoid crashing the market... they held them back, to unload at once, crashing the market? hmmm...

and they do move that fast. once it is in foreclosure, they get to write of the intrest as P&L 

Thu, 02/13/2014 - 22:16 | 4434947 novictim
novictim's picture

Why the big jump in home foreclosures in the first month of the new year?

Perhaps Banks held these foreclosures back trying to prop up 2013 year-end home values. Then, come January, they had to unleash these as they had forecast a trend toward more foreclosures to come... so better to clear the books now before prices really started to drop hard?

Yep.

Thu, 02/13/2014 - 22:11 | 4434917 kareninca
kareninca's picture

posted by me here on ZH on January 30:

"All of a sudden there are loads of preforeclosure listings in my hometown in eastern CT, after years of nothing.  Suddenly on Zillow, 28 preforeclosures, to go with the 36 regular listings.  I had been looking for so many years, and seeing nothing, that I took a break from looking, and then boom.

 This is going to freak people out; it freaked me out, and my parents, who still live there.  I checked neighoring towns, and the same:  sudden huge number of preforeclosures easy to see.  Maybe they findable somewhere before, but now they are in your face.  Houses that sold in 2003 for $480k, now have Zillow "foreclosure sale estimates" of 250k.  The more modest houses don't seem to be listed, but I can't imagine that that is because they aren't behind in payments too; the banks probably just can't be bothered.  This is horrible; I had thought things were holding up okay there; I guess it was smoke and mirrors.  Hope these people have saved some money from not paying the mortgage, over the past several years.

I looked at West Hartford, too.  Just six months ago I had checked; there was basically no sign of distress on the regular/free sites.  Now about 115 preforeclusres.  That is a very desirable town to many people."

Update:  now there are three more houses listed in preforeclosure in my hometown of 5000 people, and they are the more modest houses.  BTW the houses that my parents personally know are in some sort of financial limbo, are not on Zillow at all (except their usual, "here's a house that exists" listings)  -  so clearly there is more out there to come.  I bet that in the few towns nearby where there are still very few preforeclosure listings  -  the really rich towns  -  they think they are still okay, but I bet stuff is just being hidden like it was in my town.  If you look at Cos Cob, CT (my idea of a rich western CT town), there are 78 preforeclosures listed.  That is a huge number for a town like that, and that is what is just now being admitted!!!!  With a population of 6770, that is a worse ratio than in my crappy bourgeoise hometown!!!  That is so awful that i don't even feel schadenfreude, at least not nearly as much as I would have expected; more dread than anything else.

 

Fri, 02/14/2014 - 20:15 | 4438179 Freddie
Freddie's picture

That is a very desirable town to many people.

Paying taxes in CT is getting less and less desirable for most people with an IQ above 70.  The unionized govt workers, towns and cities are running out of suckers to pay those taxes.

I have a friend in Manhattan. He takes weekend trips with his wife. They drive through the NE like CT, RI, Mass etc.  He has said that many of these scenic Yankee and Norman Rockwell towns are looking more and more like Tijuana.

But the drug cartels and meth dealers make good neighbors.  The idiots voted for this.  As long as the Red Sox and Patriots win - life is good.  

Sat, 02/15/2014 - 01:05 | 4438872 kareninca
kareninca's picture

Yes, the taxes are very high.  People would tolerate that if there were jobs  -  after all, look at Silicon Valley, people tolerate $1.4 million crapshacks because there are jobs.  But there are no jobs, in part because the regulations businesses must follow are mind boggling.

I'm skeptical re meth labs being a problem, at least in CT and RI, since the population is ancient, and growing ancienter; elderly Yankees and elderly Italian-Americans aren't cooking up meth (http://www.ct.com/news/advocates/latest-news/nm-ht36ncmeth-20130903,0,20...)(only 42 meth lab busts in all of NE in 2012; apparently the cheap and readily available cocaine and heroin in CT, keeps the meth out).

There will be no-one to buy these houses; it is a downward spiral.  Unless there is a war, then things will be great again (/sarc); lots of defence industry in the area.

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