Housing Recovery on the Horizon?
August 19, 2010 by Greg Saunders
Hey folks you know just the other day I was at the office and I could not help but over hear another agent battling with a bank to replace an incompetent…okay inept bank representative assigned to the short sale he was working. After his called ended we engaged in some interesting dialogue that resulting in him showing me a email reply that he had received from that same bank.
Without mentioning the bank, the email basically stated that the bank in the determination of the current market value of the property did not consider or utilize any foreclosures. In fact the bank went on to say that while foreclosures are prevalent in the marketplace they are not significant enough to essentially impact or be the driving force of sales in the marketplace.
All I could say is; “What??? You have got to be kidding me right? What planet are these guys on?” We both shook our heads. Man, “there is no such thing as an easy real estate transaction anymore.”
According to the RealtyTrac U.S. Foreclosures Market Report, foreclosure activity rose 31% during the 1st quarter of 2010 and that’s up 40% from the same period in 2009. Georgia reported 39,911 foreclosure filings. Folks, one in every 226 Georgia housing units received a foreclosure notice giving our state the dubious distinction of being the 6th highest state in the country for foreclosures. Walton County posted the highest foreclosure rate (1 in 43 homes received a foreclosure notice); followed by Newton county (1 in 46); Henry County was #3.
Just for the record, Fulton County led the state in total foreclosures for the 1st quarter of 2010 with 5,403 properties with foreclosure filings. Gwinnett County was second with 4,406, Dekalb was third with 4,025, Cobb was fourth with 2,962 and Clayton was fifth with 1,726. All totalled Georgia accounted for 4% of the 932,234 foreclosure filings nationwide.
If you are keeping score….California continues to lead the pack with the highest level of foreclosure activity at 216,263 followed by Florida (153,540), Arizona (55,686), Illinois (45,780) and Michigan (45,732). After all is said and done, the total US foreclosure activity grew by more that 7% as it was reported that 1 in every 138 household received a foreclosure filing during the 1st quarter. All in all the top 10 states with the highest foreclosure rate account for 73% of the foreclosure filings!
Okay folks, given all the statistics what is the key to stimulating our hobbled housing recovery? Well first we must get banks to be more responsive to housing demands. Right now it is becoming increasing more difficult for investors and other potential borrowers to get back in the housing market. This will definitely result in a slowing of the recovery of housing market values. However, I think part of the recovery will have to involve an actually psychological change.
That’s right folks….a change to our views and opinion of the housing market will also be required. If you think about it how many of us after being inundated with the gloom and doom promulgated from our daily dose of the news maybe have detected an altering of our conventional wisdom related to investing. Could it be possible that those changes may have been a prominent factor in some people making the decision not to enter the housing market until the trend changed?
So, what being done? Let’s see….at the start of 2009 there were approximately 2.5 million loans that were 60 day plus delinquent or in foreclosure by the end of January of 2010. During that same time frame there were roughly 2 million loan modification in process; 116,000 permanent HAMP modifications, 830,000 trial HAMP mods and 1 million completed non-HAMP modifications. So you do the math….2.5 million loans and 2 million modification.
Additionally, keep in mind that many of the modification or approximately 60% will re-default later. In fact, JP Morgan Chase has notified its investors to expect re-default rates on completed modifications to run about 35% to 50% one year out and as high as 65% three years out.
Folks….the point to be made here is that there is a significant amount of distressed inventory out there despite what some banks as mentioned earlier seem to want you to think. To be perfectly honest, banks are not in the real estate business, period! But it is plausible to say that this distress inventory whether sold REO or short sale needs to be sold if there to be any type of housing recovery.
Lastly, it is imperative that we must also look for interim mortgage debt solutions for many home owners that have lost jobs on in distressed situations.