The real estate sales market is still coming up short

By Gregory J. Wilcox, Columnist

December 20, 2008

As this year wheezes to the finish line, it leaves behind a legacy of financial carnage that encompasses the globe.

The federal government, and the Obama administration that takes office next month, will continue to throw what will likely be more than $1 trillion at the problem. That's an incomprehensible number.

Here's another one that's even more staggering:

In this year alone, home values across the country have plummeted more than $2 trillion. You can fall asleep trying to count the number of zeros after the 2.

But wait. There's more grim news.

About 50 percent of loan modifications don't work and the homeowner defaults anyway.

This cheery news comes courtesy of the National Short Sale Center based in Scottsdale, Ariz.

Business is pretty good for these folks.

A short sale is one in which the property is sold for less than is owed on the mortgage.

Of course, the mortgage holder has to agree to take the lower price.

The center said it acts as a neutral third party brokering a deal between the homeowner and mortgage servicer. It also handles the paperwork.

In an e-mail last week, the company said that short sales hit a record this year in Arizona, Nevada, California and Florida.

This is as unsurprising as it is distressing and the trend has a pretty long tail.

The Federal Reserve Board estimates that next year about 2.3 million more homes will be lost to foreclosure as the residential real-estate market continues to unwind.

That pain will be felt here, too.

In the 2008 third quarter, foreclosures from Glendale to Calabasas soared 203 percent as a record 2,589 properties were lost because the owners could not make their mortgage payments.

Of course, the Short Sale Center prospers in times like these.

Some of the numbers they have worked up are pretty interesting:

The company said it gets more than 3,000 calls a month from homeowners looking for help.

This year, foreclosures or short sales accounted for about 40 percent of the nation's home sales.

(Of course Southern California, always a trendsetter, is sadly ahead of the nation in this statistic, too.)

During the past three months, foreclosures have accounted for about half of all Southland resales, according to market tracker MDA DataQuick.

In November alone, 55 percent of the homes sold in the six-county region had been foreclosed on in the past 12 months. That's up from 51 percent in October and 19 percent a year ago.

Foreclosure sales ranged from 44 percent in Los Angeles County to 70 percent in Riverside County.

Loan modifications don't seem to be working. More than 50 percent of homeowners who had their loans modified became delinquent on the payments within six months.

So far federal help for this problem seems to be nothing more than talking points.

At least here, according to Mary Funk, president of the Van Nuys-based Southland Regional Association of Realtors, which covers the San Fernando and Santa Clarita valleys.

"A few of the short sales are coming off the market as some banks are starting to restructure loans, but otherwise the $700 billion bailout has yet to trickle down to help homeowners or buyers who need a loan," she said.

This mess will end when prices finally find a bottom in this current cycle, said Daniel Blake, director of the San Fernando Valley Economic Research Center at California State University, Northridge.

And it's not a question of if, but when.

That's the tough part because prices are still falling.

"So much of the lending is based on home equity, and we're not sure what home equity is going to be next month," he said.