Got Foreclosure! - Blog

“Sacramento, state foreclosure sales decline” - this headline on Sacramento BizJournal.com peaks interest. A clear trend of declining foreclosure numbers should signal the market’s bottom, right?

Yes, in a sense - and the BizJournal is sufficiently ambivalent. But the numbers are telling more truth…

Foreclosure sales in California have declined statewide in February of 2008. New Notices of Default filings have declined as well. However, the number of trustee sales in February relates to NOD’s that were filed before October 2007 (that’s how long it takes at a minimum to take a property through the required foreclosure filing periods).

The number of new NOD filings in October 2007 was just below 29,000. These NOD filings resulted in just over 16,000 Trustee Sales in February 2008. In other words just about 55% of NOD filings currently end up at a trustee sale. (Note: for argument’s sake we’re neglecting any delays in the foreclosure proceedings by way of negotiations, BK filings etc.)

Now, let’s take a look at new NOD filings. The number of NOD filings was almost 35,500 in Februray 2008, down from just over 40,000 in January. Assuming a similar ratio of NOD filings to Trustee Sales 4 months later (55%), we can expect about 22,000 Trustee Sales in June 2008, and approximately 19,525 Trustee Sales in July 2008.

You don’t need to have a crystal ball to figure this one out. As long as you look at reliable foreclosure data, it’s crystal clear that this dip in foreclosure sales does not indicate a bottoming out of bank owned inventory. With only 2-3% of all “foreclosure sales” going to 3rd-party bidders (as opposed to reverting to the lender), lenders are setup to take back another 16,000 to 20,000 properties per month until the current peak in NOD filings (in January 2008) reaches its echo in foreclosure sales.