In a recent article in the Wall Street Journal, Analysts from Amherst Securities projected a come back of over 7 million new foreclosures.
- Which is 5.5 x’s the amount as in 2005.
The causes range from failed Loan Modifications, Legal wrangling, re-defaults of loan mods, bank practices and moratoriums. What this means:
- National home prices drop another 6 – 13 %
- Higher in the hard hit states of California, Florida, Nevada and Arizona
Why is their a “Shadow Inventory“?
- Banks are unwilling to take on the added expense of additional foreclosures. The cost of repairing, marketing and upkeep is too great. It is cheaper to keep “non- performing borrowers” in the properties.
- Banks are offering “Loan Modifications” in lieu of foreclosures however, as most of us are aware, they often fail as a result of the property being upside down in equity and the higher payments associated with the initial loan modification. A modest change in a mortgage rate is not enough to impact the monthly payment. And as in most cases, lenders are not offering reductions in mortgage principles.
Another interesting fact is due to this “swell” in inventory, banks, which will traditionally bid on these properties at the “courthouse steps” are no longer bidding, allowing for deep discounts to able investors.
- According to ForeclosureRadar.com, 19%of all homes sold in California trustee sales in August were to investors and not lenders…a 500% increase in the past year.
So, what this all means…we’re faced with a “tsunami” of foreclosed homes that will undoubtedly affect the price of your and your neighbors home.
No matter how the televisions pundits spin this mess…we’re facing a continued catastrophic upheaval in the housing industry.
As a real estate agent, don’t be panicked…get to know your “short sale” process…it’s the banks most favorable alternative. Short sales bring an additional 25 to 40% more to the banks bottom line than a foreclosure or “deed in lieu.
This is not a buyers market, it’s definitely not a sellers market…it is an Agents market…and you can make the difference in your future in this tide of a changing market.
