I think the question is, how long can these lenders hang on to their REOs, literally throwing good money after bad? The numbers of buyers ARE decreasing, foreclosures WILL increase, and those properties WILL have to eventually be sold at whatever the market at that time will bear. There’s no IF involved.
Those distressed sales will eventually be sufficient in number relative to the sales volume that they WILL drive it, thereby resulting in an ever-declining market level.
Those people who can hang on will do so, but they aren’t the ones setting prices. It’s the must-sell transactions that will do that.
Really, the only thing that’s even halfway surprising so far is the pace at which the credit markets are unwinding. Everything else up until now has been moving along according to earlier projections.
– The outlying areas got it first while the more central areas have lagged.
– The investors have left the building and the inventory has racked up as a result.
– The builders have tapered off on those developments they were in a position to walk away from, and they’ve played games with concessions and deceptions to avoid showing the losses in their neighborhoods so they could continue selling off their units.
– Jobs in the RE sector are drying up and all the retail sectors are sucking gas.
If you’re looking at the cycle as showing catastrophic losses between months 12-18 then you’re bound to be disappointed. The last downturn lasted 5 years and they were correcting from a spike that was only 1/3 the size of this one.
We’re not kidding – this will take years. Sign the 2-year lease and relax ’cause you might have to sign another one before this is all over.
