Monday, April 30, 2007

Where Are We Headed?

Click Image for Full Size
Click Image for Full Size
Given the explosive growth Maricopa County's Trustee Sale Notices saw in the second half of 2006, the numbers for the first four months of 2007 have seemed somewhat like a plateau. April’s total was 11 below March’s 1720, leading me to seriously wonder what the future holds.

From a recent Reuters article:

Subprime mortgages to less creditworthy borrowers comprised only 13.7 percent of outstanding U.S. mortgage debt in the fourth quarter of 2006, and their delinquency rate was 13.3 percent, according to the Mortgage Bankers Association.

If, like the article, you believe that the woes of the subprime mortgage market are “well contained,” then perhaps we have a hint of what the remainder of 2007 has in store.

Assume, for (extreme) simplicity’s sake, that...

1) All 1,250,231 houses in Maricopa County have a mortgage, and
2) The percentages quoted above remain the same for all of 2007, and
3) No one who does not have a subprime loan will become delinquent,

... then that means the average number of Phoenix-area trustee sale notices per month should come to 1898. I’m inclined to take it as a good sign that we’ve only seen a peak of 1720 so far, in spite of Mish’s contention, over at his Global Economic Trend Analysis, that containment is spreading.

However, the graph below, far more than Mish’s falling sky pronouncements, gives me pause:

Click to Enlarge this Graph
Trustee’s Sale Notices are a lagging indicator, since they don't happen until the borrower has been in big trouble for several months. That fact, in conjunction with the data behind the Credit Suisse graph, leads me to believe that late 2007 through early 2008 (and beyond) is when we should be expecting the big wave to hit. How big? Who can say?


Matthew said...

Is this ARM reset schedule just for Arizona??

Jim Lippard said...

Matthew: No, this is for the entire U.S.

Matthew said...

Thank you so much!

I was wondering if you knew where I could locate hostorical foreclosure rates by quarter for the last year or two?

Jim Lippard said...

Matthew: I'll defer to Einzige on that one, since he knows where to get historical preforeclosure rates--perhaps the actual foreclosure rates are also available.

I usually find my stats with Google search, and in response to your question I found this 2003 Arizona Republic report on foreclosures, which reports "The number of people across greater Phoenix at least three months behind on their mortgages and in danger of losing their homes climbed a staggering 50 percent during the past two years, hitting a record 14,178 in 2002. The foreclosure rate is rising so rapidly that it's outpacing record increases in home sales and prices. So far this year, home foreclosures climbed an additional 10 percent."

That rate is an average of 1181.5 foreclosures per month. Based on what we're seeing now for preforeclosures (notices of trustee's sales), we will likely break that record in 2007 or 2008 (or both).

Chris Mattix said...

I was wondering if there is an easier way to get the raw numbers of how many Notice of Foreclosure were recorded with Maricopa County each month besides searching the Recorded Docs section of the county site as this takes a long time. Do you have the raw data that was used to create your chart? I would really appreciate it. Please email me at

Einzige said...

Sorry I've been lax in responding to comments, here.

Actual foreclosure data I don't really know about. I'm sure there's someplace somewhere that tracks it, but once a house actually goes up for auction, unless you're the one buying it, from an investment standpoint, who really cares? Try someone at ASU.


I feel for ya, man. Pulling that historical raw data off the Recorder's office web page was a time-consuming, mind-numbing exercise. Why do you think I water-marked the resultant graph? lol.

They recently improved the page, somewhat, but it's still mostly a pain.

Ask me again later. Perhaps I'll be in a more charitable mood at that point.

J said...

This is interesting. I just pulled the numbers for Pinal County. NOT's were 819 for January '08. That compares to 290 in Jan. '07 - that's a 282% increase. Not a good sign for the market.