Friday, May 30, 2008

District foreclosure data

While processing the District's foreclosure data for April 2008, I wondered whether that month's number of notices of foreclosure sale was abnormally high. There have been many press reports about the spike in the number of foreclosures nationwide and I was curious whether the District was in line with the national data.

While the volume in 2008 is much higher than that of 2007, how does it compare to 2006? Is 2008 an anomaly? To answer the question, I got my left-brain and browser to work and collected the District's monthly notice of foreclosure sale data for 2000 - 2008. I researched that span of time because it predates the housing boom/bust and the Internet bust and, I hoped, would eliminate data distortions those events might engender. Understand: I'm not a statistician so I didn't calculate standard deviation, perform a t-hat test, or anything like that.

Interestingly, the data show that 2008's rate of notice of foreclosure sale, while high through April, is only 18% higher than the same period (January - April) in 2000, but it is almost triple that of 2007. Beginning in 2001, the aggregate number of notices declined YoY until December 2006, when the upward climb began.

A question that comes to mind is whether, in the context of foreclosures, the market's returning to normalcy? Moreover, why the fall in the number of foreclosure notices beginning in 2001 - is that directly attributable to the Fed's easing of interest rates? Or is more related to the fact that in the housing boom, it was easier to sell and escape foreclosure?

Any ideas?


Mose said...

I think your last two questions are entertwined. The dramatic lowering of interest rates following the bust in stocks is widely credited with sparking the boom in housing prices. It was the steadily rising housing prices (sparked by the lower interest rates) that was key to avoiding foreclosures. Basically, if the house can be sold at a profit, a foreclosure shouldn't happen.

Jessica Wilkie said...

Agreed - people were able to escape foreclosure precisely because of the housing boom. People would buy anything in 2004-2005. These days, the correction is in the fact that the more undesireable places aren't selling.

I am a Realtor and see a lot of junk out there -- decrepit, or very tiny, or nothing-special condos -- at such prices!

Properties are no longer going to sell just because you put a price tag on them. There's too much inventory. Hopefully sellers/developers/ex-investors will begin to realize that and adjust their expectations.