Here is the unofficial problem bank list for Feb 17, 2012. (table is sortable by assets, state, etc.)

Changes and comments from surferdude808:

As expected, the OCC released its enforcement action activity through mid-January 2012 this week, which contributed to several changes to the Unofficial Problem Bank List this week. Given that the FDIC played nice with community banks by hosting an outreach conference in D.C. this week, it is not surprising they kept the closing teams grounded. In all, there were seven removals and five additions that leave the list with 956 institutions. However, assets were virtually unchanged at 9.56 billion. A year ago, there were 951 institutions with assets of 8.6 billion.

All of the removals were cures and include Plumas Bank, Quincy, CA (2 million Ticker: PLBC); The Farmers National Bank of Prophetstown, Prophetstown, IL (0 million); Resource Bank, National Association, Dekalb, IL (2 million); The First National Bank of Eagle River, Eagle River, WI (6 million); The First National Bank of Plainview, Plainview, MN (0 million); Western National Bank, Cass Lake, MN ( million); and The First National Bank of Frederick, Frederick, SD ( million).

The additions include Riverview Community Bank, Vancouver, WA (1 million); Mariners Bank, Edgewater, NJ (4 million); American National Bank, Oakland Park, FL (4 million); Commerce National Bank & Trust, Winter Park, FL (0 million); and First National Bank of Wauchula, Wauchula, FL ( million).

Next Friday there is a good chance the FDIC will release its enforcement action activity for January 2012.

After peaking at 1,004 institutions last July, the number of institutions on the unofficial list has slowly declined. But this is still very high.

Calculated Risk

Container traffic gives us an idea about the volume of goods being exported and imported – and possibly some hints about the trade report for January. LA area ports handle about 40% of the nation’s container port traffic.

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

Click on graph for larger image.

On a rolling 12 month basis, inbound traffic is up 0.1% from December, and outbound traffic is flat.

On a rolling 12 month basis, outbound traffic is moving “sideways” for the last 4 or 5 of months, and it appears inbound traffic has halted the recent decline.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

For the month of January, loaded inbound traffic was up 1% compared to January 2011, and loaded outbound traffic was flat compared to January 2010.

On both a rolling 12 month and year-over-year basis, imports and exports were mostly unchanged.

Calculated Risk

“Geez, it’s almost there. If we could just get another 851,489 houses for sale in the market, we’ll have it juuuuuust right…”

We released our February National Housing Report yesterday – “US Home Prices Already Climbing in February,” in which we highlight the role of declining active market housing inventory in this year’s home price stabilization.

Ironically, Jonathan Miller (author of Matrix Blog) wrote on Monday – “The Decline In Inventory Right Now is NOT a Good Sign.” Jonathan and I disagree on this point, which we delightfully and civilly discussed via email this morning.

Here’s the way I see it: It wasn’t long ago that the world was worried about millions and millions of foreclosed homes hitting the open market and crashing home prices another 30%.  Now we’re worried there’s not enough supply. Huh?

The problem with the housing market in the first place was too much supply at bubble prices and demand levels. Because housing supply is difficult to destroy or spoil (Greenspan’s suggestion to burn down houses and rotting REOs aside…), I’d much rather be in a place with very low supply – even a shortage in terms of “homes for sale relative to demand” – that causes prices to rise in the short-to-intermediate term. Trying to fine tune the “right” supply level is very dangerous.

Plus, other factors are influencing active market inventory:

1. Short Sales: Some of the “lowness” in the active market inventory is due to the shadow/distressed inventory which will leak out this year via the continued short sale push from the GSEs and banks. These institutions have very large NPV functions and are concluding that a short sale at today’s price > 6-36 month foreclosure process in many cases.  This will nag home prices to the dismay of non-distressed home sellers, but it’s a realistic way to handle the problem.  Much better than foreclosing on another 6-10mln people behind on their mortgage. You can’t have it all…

2. REO-to-Rental: Bulk REOs on the GSE/bank balance sheets are converting to rental housing with recent program announcements from Freddie Mac, Fannie Mae, the FHFA, and Bernanke.  This means that this subset of inventory won’t hit the active listings in the short-to-intermediate run. Investors buy and convert these properties to rental. Eventually when home prices rebound significantly, investors may attempt to re-sell into the market, especially if price-to-rent ratios make it economically sensible for renters to enter or re-enter the marketplace, but that is 5-7 years down the road.

3. Supply & Demand: One can use either an upward-sloping supply curve or a vertical/no slope supply curve to depict active market inventory.  An upward sloping housing supply curve says that as prices rise, the quantity supplied along a fixed supply curve will also rise. However, in this scenario, prices will also drop because a rise in supply creates a surplus gap at a given quantity demanded along a fixed demand curve.

The good news is that the opposite also happens – when prices fall, the quantity supplied falls along the fixed upward-sloping supply curve, as home sellers and firms withdraw or stay out of the market. This is the argument that Jonathan makes as to why supply that is “too low” is a bad sign for the market – low supply is due to low prices.

But… if that happens for a prolonged period, then a shortage develops in the market which causes prices to rise. This is what we’re seeing now. Then, home sellers and firms will re-enter the market as suppliers when they see prices stabilize and rise.  Part of this supply re-entering will be home owners on the underwater mortgage margin.  They’re current on their mortgage so they don’t qualify for a short sale or modification in most cases. They want to sell but can’t sell because they are LTV=101 to 120 and don’t have the cash on hand to bring to closing.  If the market pops 5-10% because of a supply shortage, then it becomes feasible to enter the market.

(Personally, I assume  a vertical/no slope supply curve and a fixed demand curve. On the supply side, there are a discrete number of homes for sale at any one point in time, and there is a baseline number per year with seasonal fluctuations that enable the supply curve to move more nimbly back and forth. Principally, demand curves are fixed and are very hard to shift, though the market is seeing the demand curve shift downwards with a preference change to rentership – both by choice and by force – as the homeownership rate falls back into the mid-to-low 60%, and heads lower every quarter.)

In either an upward sloping supply curve or vertical supply curve, the supply curve moves  back and forth on expected future prices (i.e. market conditions) and the number of firms (i.e. individuals, homebuilders). When these market suppliers sees a sustained recovery and expect future prices to rise, then a chunk of sellers enter the market and homebuilders start building homes.

It’s dangerous and Keynesian (worse) to think that anyone can decide the “correct” amount of active inventory, particularly when using history as a guide.  Looking backwards too much for too long got us here in the first place.  I’m not advocating a free-for-all in the housing market – it’s way too screwed to extract the government programs now.  And it seems that HARP II might actually be working.

I do think that the market is responding appropriately right now with low supply and I’d really like to see the current situation play out in 2012 before a bunch of politicians or lobby groups decides on the optimal housing supply that should be available to buyers.

“Or maybe it should be 853,109 more homes…”

In a down market, savvy real estate investors are eager to find out how they can best leverage their resources. And expert forecasts are some of the best tools they can use to back up their strategies. A good example comes from real estate consulting firm John Burns Real Estate (JBRE), which has recently predicted that homeownership will fall from 70.0 percent to 62.1 percent by 2015 due to a weak economy, weak consumer confidence, limited mortgage availability, higher rates of foreclosures and short sales, and other factors.

Read the rest of Real Estate Investors Can Profit in a Down Market »

For more articles like this, please visit our Real Estate Investing Blog.

© 2012 by Marco Santarelli and Norada Real Estate Investments.
Your Premier Source for Turnkey Investment Property.
]]> http://reibulletin.com/real-estate-investors-can-profit-in-a-down-market/feed/ 0 http://reibulletin.com/housing-short-sales-increase-foreclosure-sales-down-year-over-year/ http://reibulletin.com/housing-short-sales-increase-foreclosure-sales-down-year-over-year/#comments Tue, 14 Feb 2012 00:05:57 +0000 admin http://reibulletin.com/housing-short-sales-increase-foreclosure-sales-down-year-over-year/ CR Note: There are only a few areas where the MLS breaks down monthly sales by foreclosure, short sales and conventional (non-distressed) sale. I’ve been tracking the Sacramento market to watch for changes in the mix over time. (here was my post this morning: Distressed House Sales using Sacramento Data)

Economist Tom Lawler sent me the following table today for several other areas. For most of the areas (with the exception of Reno), the distressed share of sales is down from January 2011. The share of short sales has increased in most areas, while the share of foreclosure sales are down – and down significantly in some areas.

	Short Sales Share		Foreclosure Sales Share		Total “Distressed” Share
	11-Jan	12-Jan	11-Jan	12-Jan	11-Jan	12-Jan
Las Vegas	26.6%	28.1%	48.8%	45.5%	75.4%	73.6%
Reno	40.0%	37.0%	37.0%	40.0%	77.0%	77.0%
Phoenix	22.6%	29.8%	47.6%	27.9%	70.2%	57.7%
Sacramento	25.6%	32.1%	47.6%	34.5%	73.2%	66.6%
Minneapolis	15.6%	16.2%	45.3%	39.1%	60.9%	55.3%
Mid-Atlantic (MRIS)	14.7%	16.4%	26.7%	16.9%	41.4%	33.3%

Note: The table is a percentage of total sales.

The general trend is short sales are up, and foreclosure sales are down – and total distressed sales are down too, although this could be related to the foreclosure process issues.

Calculated Risk

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