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Dawn of the shadow inventory: a significant upswing in Notices of Default filed in California

By
Real Estate Agent with Alain Pinel BRE 01367196

ForeclosureRadar's August 2011 report showed a significant upswing in the number of Notices of Default (NODs) filed in August, to its highest level in a year.

The report states that the Notices of Default or Notice of Trustee Sale rose in nearly every state. This may have been driven by Bank of America where there was an overall increase of 116% in foreclosure starts (or NODs) in August.

According to Sean O'Toole, Founder and CEO of ForeclosureRadar.com, "Bank of America appears to be primarily responsible for the surge in foreclosure starts this month since their average time to foreclose has recently increased to more than a year. It is unclear that these foreclosures starts will lead to an increase in foreclosure sales anytime soon." The report also noted that the time to foreclose increased to 333 days, which is 49 days longer than a year ago.

California foreclosure trends

Just as we were seeing a slowing down of NODs and TS, we are now rudely awakened by the drastic upward spike. We can assume that many loans are re-setting, and the property owners are unable to meet the higher mortgage payments. But in one month?

August 2011 NODs jumped by 69.5% over the previous month, while Notice of Trustee Sale (TS) climbed by 6.06%

 

California's top foreclosure counties

Here are the counties and what the % increase in NODs were over the prior month

 

Alameda County foreclosure trends

In my neck of the woods, the jump is even more dramatic, with NODs climbing to 71.97% over the previous month, while TS was 7.78% over.

In Alameda county, here are the top foreclosure cities, and the % by which the NODS increased in August 2011

 

Discounted competition is entering the market

Steve Harney's KCMBlog.com posted a picture that seems to sum up why it's important to sell now. The shadow inventory is currently at 47 months (per S&P 2011 2Q Report) ..... discounted competition is coming!

Go to his blog. Read about the 5 Great Reasons to Sell Your House Today.

Comments(4)

Debbe Perry
Real Living Carolina Property - Morganton, NC
828.439.3084 Morganton/Lake James NC

Sobering news, important to know. Of particular interest: "Bank of America appears to be primarily responsible for the surge in foreclosure starts."  This while they're laying of 10s of thousands of employees nationwide - yikes!

Sep 13, 2011 09:35 PM
Deborah Byron Leffler BzyBee Real Estate Lady!
Keller Williams Realty Boise - Nampa, ID

I agree with Debbie....I know I am listing one this week that is B of A...they thought that they were all "modified" and worked out...and by October would be caught up....nope....now B of A says that they are foreclosing in January and they would send back all the work out money!  It is so devastating to say the least!!!

Sep 13, 2011 11:41 PM
Doug Bullwinkel
E Mortgage Capital, Inc. NMLS 1416824 - Roseville, CA
Mortgage Loan Officer NMLS #281609

This shadow inventory is way overdue in getting on the market.  Many areas of California have been experiencing a severe lack of inventory so hopefully this will help.  It will be interesting to see how they will handle this increase in workload with a reduction of work force. 

Sep 14, 2011 06:07 PM
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Debbe -- the short sale clients are coming to the realization that their attempts for loan modification have failed. And they face foreclosure, or toughen up and do a short sale.

Deborah -- looking at my active and oending listings, 75% are short sales. It's become my bread and butter.

Doug --- the reduction in force can be resolved if they will hire highly qualified, resourceful and industrious people  But I've made enough calls to these banks and dealt with so many simpletons on the front line. God help us!

Sep 14, 2011 06:30 PM