Thought this was an article worth sharing...what are your thoughts on this?As you already know, the economy has been in the gutter, with banks failing, people losing their jobs and homes, companies going out of business, and many other horrible happenings. It has been said that this recession is almost as bad as the great depression of 1929.Traditionally, growth in homes sales helps lead economies out of recessions. Did you ever stop to think about how many people make money from the sale of single home? Escrow companies, mortgage agents, title reps, termite inspectors, locksmiths, painters, flooring, furniture and appliance companies, real estate agents, home repair stores, contractors, and many others make money due to the sale of one home. When these people are paid, they take their money and spend it on various items including: groceries, entertainment, clothes, vacations and cars. Then the second group of people, who sold the first group of people goods and services, use their salaries or profits to buy things…this trickledown effect goes on and on and on.Within the past 36 months, home prices have dropped as low as 40- 60% in some areas. Homes that were selling for mid 600’s are now selling at low to mid 300’s.To get out of this recession, our country needs the economy to get moving and grow, this growth and movement forward is generated by money changing hands. When no one is buying the economy stays flat.When buyers have several properties to choose from, home values tend to stay lower. When there is low inventory, prices rise. In August 05, we had almost a 25 month supply of properties on the market; this high supply and low demand resulted in lower prices.We no longer have a glut of homes for sale, and demand for homes is rising. We currently have only a 2.2 month supply of homes for sale in our market. In areas where home prices dropped dramatically, we are seeing slight price increases.Today, in the current market, many of the homes we sell are listed and almost instantly crowded with multiple offers. In some cases, it’s common to see anywhere from 5-25 offers on one property.Homes for sale are receiving multiple offers due to buyers increasing confidence in the real estate market, notwithstanding the “threats” of a tsunami of listings.The banks and government cannot afford to sell off a large number of REO’s right now. With consumer confidence up, and houses in the mid to low 400’s selling Southern California, a flood of REO’s would only cause the prices to drop again. The government and banks understand that high inventory with the same or less demand will equal lower prices.How does the government control the banks? Do you remember all the hype from the trillion dollars in bailout money? The golden rule applies: he who has the gold makes the rules. So our government is urging the banks not to dump their inventories.What’s going to happen to the inventory if it just sits there? Some of the REO’s are coming out on the market, but it’s by no means a tsunami. Some of the banks are renting foreclosed properties out since they see the market rising, they have decided to hold onto assets for a year or two and then sell at higher prices. Some of the banks are selling to large hedge funds which are buying huge blocks of properties which they are renting out. Their plans are to hold the properties for 3-5 years and then sell when prices are higher.Clearly you’re beginning to see why a flood of REO’s just isn’t going to happen.Instead of tsunami,we might see a small swell. Now is absolutely the best time to buy. Waiting a year or even a few months more can cost a buyer tens of thousands of dollars. It’s in your best interest to encourage your buyers to make the decision to move forward today.WHAT ARE YOUR THOUGHTS…TSUNAMI OR A SMALL SWELL?Tsunami Or A Small Swell?By Neil Schwartz
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I just checked a bunch of properties in pre foreclosure status within a close proximity. Lenders have delayed their action of foreclosure and some loan balance due have exceeded $ 50,000. I have seen a few at $ 95,000 due to the lack of payment by borrowers. Some of them did not make any payment for more than a year and I don’t believe they will be able to change their status. There are also more high end properties are in default. The loan payments due is increasing each month to attain a high balance. How much lenders can absorb this lack of revenue without, one day, to proceed to the foreclosure? I believe the amount of the lack of payment can determine the height of the swell …or tsunami.
All I know is once a week I pick up a copy of the local paper that is designated as the one to publish notices of trustee sales. This is a small town and the amount of trustee sale notices has not changed for years now. Every time I pick up a paper there are still between 20 to 34 notices. It's hard to believe this kind of sustained volume. You bigger city boys might scratch your head over what I'm talking about but this is a small town of around 50,000. The initial wave of 2007 -2008 will never be repeated, but it's obvious that until those notices start fading away, we will be making some money in REO. I'm talking Marysville- Yuba City CA area here.
At least here in Vegas it will be at least ten years of drawn out hell. Everyone I know is so upside down there is a zero chance of getting right side up within a generation. And all this will do is feed more foreclosures. The govt and banks can do anything they want to stop or slow the REO flow- all they are doing is delaying the inevitable.
Same thing goes for Cali- however they will recover faster than vegas
The Las Vegas real estate market has been doing great. However, due to our economy being tourism drive we are not seeing the benefits of the real estate market. Tourism is key to Las Vegas making a comeback. Unfortunately, it does not seem like it's going to increase any time soon. As a matter of fact it will most likely decrease in the fall and winter. That might be a great time for buyers to have an opportunity to pick up an REO property.
Carlos,
Very interesting article. It may be time to be in property management for managing
the rental of these foreclosures. As I recall, over the past six months several of the
Asset Management companies, along with Freddie and Fannie, have put some sort
of rental policy in place, Where they were trying to identify property management
companies.
I not sure that eneough attention was paid to this manuever it at the time, seeing that
there was such a feeding frenzy on REOs.
Will it be enough to prevent the tsunami? I don't know.....
Carlos, I agree- small swell. Anyone see CNBC this morning NAR & The Schiller Report- economy's great , home prices up, housing starts up, consumer confidence up & stock market way UP. Wish I bought Freddie & Fannie 2 months ago, could've made alot $$$$$.
Ranjit Sandhu > Billie DalessioAugust 25, 2009 at 4:02pm
Everything else is up except job market? Isn't unemployement up also? In my oppinion, we will see Tsunami in Nove-Dec. What is % of our short sale selling and for how long the bank can hold their assets?
Thanks Carlos. For an interesting take on this topic read the article in the new REO Insider by Austin Kilgore. I tend to think we will not see the tsunami everyone expected but it will be a considerable wave. Recent conversations with a couple bank contacts reveal that they were told to get all their teams vacations out of the way because it is going to be a big 4th quarter. How big, who knows? It's clearly in the sellers best interest to hold back and not compete with themselves in price wars but the amount of shadow inventory, especially in California is colossal at this point. My inventory has been extremely low since June and I have been upside down with paying to keep my team going so I would welcome a little off shore swell about now.
Replies
Same thing goes for Cali- however they will recover faster than vegas
http://vegasbubble.com/2009/08/23/the-next-bubble-california-dreamin/
Very interesting article. It may be time to be in property management for managing
the rental of these foreclosures. As I recall, over the past six months several of the
Asset Management companies, along with Freddie and Fannie, have put some sort
of rental policy in place, Where they were trying to identify property management
companies.
I not sure that eneough attention was paid to this manuever it at the time, seeing that
there was such a feeding frenzy on REOs.
Will it be enough to prevent the tsunami? I don't know.....
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