While this debate about RealtyTrac is interesting, its also irrelevant, as we don’t need RealtyTrac to know there are still thousands and thousands of potential foreclosures in the pipeline. Why ? Because the banks, the state of California, and the Federal reserve have said so. The reason they’ve initiated numerous programs into place, including the recent moratoriums, is because they KNOW there are millions of bad loans still out there.
Basically, the feds are throwing all their power into the market in the hopes of reducing a massive deflationary cycle. Whether you or I agree with such federal intervention, the fact is, since last December the combination of loan modifications, moratoriums, and the Feds actions to reduce interest rates have done exactly what they wanted – which was to reduce supply and create an environment where buyers would reenter the market in the short term. But they know that unless the majority of bad loans are modified, there will be a continuation of foreclosures throughout 2009-2010, although at slower pace than what we saw in 2007-2008.
One tool the Obama administration wanted to use that would have put a huge dent in the foreclosure crisis is the bankruptcy modification program. (Basically, a judge would have the power to rewrite a loan and keep the homeowner in their property) At it stands, the republicans are filibustering that legislation, which means foreclosures will continue.
Bottom line – for all of you who enjoy discussing when the bottom will hit, remember one thing. For the past four months, the real estate market has been manipulated by the Feds to create sales activity with the goal of stopping the deflationary cycle. To get a better idea of when the true bottom will hit, one needs to know how many additional moratoriums will be put in place, and how much longer the Feds will keep interest rates artificially low ? If the Feds continue indefinately with the current policies, then we could see an “artificial”bottom sometime this year. But if the moratoriums end, and interest rates go back to more normal levels, all sectors of the market will experience downward price pressures, particularly factoring in high unemployment numbers.
