[quote=FormerSanDiegan]…If you completely ignore shadow inventory and simply look at prices, inventory and fundamentals I think you are better off.[/quote]
I think we’re all trying to do this, FSD, but the drag of “shadow inventory” (that shouldn’t even be there at this late date) is insidiously artificially undervaluing many markets by trickling out below market short-sale closings. It is THESE closings that are ruining the comps for those homeowners who “played by the rules.”
I just went to dinner with “boomers” in their sixties last night who have had their beautifully remodeled SFR (bought early ’90’s) listed in one of SD’s finest urban ‘hoods for less than six months. They haven’t gotten any good offers and lowered their price by about $40K. That’s as far as they’re going. When I asked, they said, “we’re not giving it away. We have all the time in the world.” One of them still lives in the property and they’ve been divorced about 12 years!
Don’t ever underestimate the “holding-on” power of sellers (ESP a 59.5+ yo boomer) who can easily rent for a positive cash-flow (monthly income) into oblivion.
Perhaps two years ago, a buyer could have gotten a good deal on a thrashed REO but in recent months, the vast majority (taken back by Fannie) are marketed at a competitive price with “traditional sales” after which they have had an avg of $5,700 each spent on them on in rehab.
It is NOT generally the REOs that are cratering property values today (creating “sold comps” below 2002 values). It is the short sales.
There is no reason for this in a non-judicial foreclosure state such as CA. I blame the lenders for accepting these deep discounts and letting these homedebtors escape scot-free with their mattress cash and newer vehicles, etc (extracted from their “home equity”).
Again, lender malaise is the culprit here. Hopefully, in 2013, when the Mortgage Forgiveness Debt Relief Act of 2007 is over, homedebtors will think twice before strategically defaulting, since they will be again be paying income taxes on their forgiven “phantom income” (as it should be).
