Foreclosures affecting the market — coming soon to a town near you

[PerryChase]

I read an article in the LA Time about foreclosures and according to that article; banks aren’t selling foreclosures at a bargain — yet.

http://www.latimes.com/business/la-fi-homes8jun08,0,807089.story?coll=la-home-center

“The impact on the neighborhood and the community is vital with us,” Carey said. “We don’t want to flood a community with below-market-priced homes and cause further deterioration.”

We’ve yet to see foreclosures affect the market but the tsunami is coming.

My predictions:

2006/2007 – Beginnings of loan resets. Foreclosures and subprime meltdown. Banks take possessions of house but don’t yet sell.

2008 – Banks start discounting houses to move non-performing assets. Foreclosures continue. Interest rates move up.

2009 – Market does not turn around and 5-year ARM begin to recast. Rates continue to move up. Lenders start going under.

2010 – More of the same. Panic starts to take hold and even the strong investors start to get weary. The negative cash flows and headaches are taking their toll.

2011-2012 – People give up on real estate. They unload and try move on with their lives.

——-

My theory about what’s different with foreclosures this time vs the 1990s is that, back then, homeowners had down-payments. Housing prices were lower. So, at the beginning of the downturn in 1990, owners who got in trouble could sell, take a loss and move on without bank repossession. Foreclosures did not skyrocket until 1996, after a protracted downturn.

Today, homeowners are 100% financed. They have no incentives to sell so they let the banks take the houses. We’re just at the beginning of the slump and foreclosures are already skyrocketing (as evidenced by the fact that, even population-adjusted, foreclosures are at an all time high).

We’ll see a whole lot more foreclosures as time goes by.

For self-preservation, the banks are trying to hold up the comps. But it’s only a matter of time until one domino causes the others to fall.

[little lady]

Hell yeah! I just saw a 5 bedroom foreclosure with a fireplace, 1970 in a good neighborhood, with good schools, in my neck of the woods listed @389k (repo) on the mls! There are currently 16 houses listed under 400k here.

[little lady]

Hell yeah! I just saw a 5 bedroom foreclosure with a fireplace, 1970 in a good neighborhood, with good schools, in my neck of the woods listed @389k (repo) on the mls! There are currently 16 houses listed under 400k here.

[SD Realtor]

Could be Perry… One thing I found was that many of the REO properties out there were simply not priced aggressively. I also noticed that when I looked up what the home went for at auction, it was evident that the lender was trying to sell the home on the MLS at a higher price.

I am sure we will see many more of these auctions like we saw a few weeks ago. Based on some of the posts that we saw after the first auction, it seems like there was alot of buying activity. I am not sure that people were getting the deals that they thought they were getting.

It will be interesting to see what will happen when the lenders finally start pricing the REO properties to really sell.

SD Realtor

[SD Realtor]

Could be Perry… One thing I found was that many of the REO properties out there were simply not priced aggressively. I also noticed that when I looked up what the home went for at auction, it was evident that the lender was trying to sell the home on the MLS at a higher price.

I am sure we will see many more of these auctions like we saw a few weeks ago. Based on some of the posts that we saw after the first auction, it seems like there was alot of buying activity. I am not sure that people were getting the deals that they thought they were getting.

It will be interesting to see what will happen when the lenders finally start pricing the REO properties to really sell.

SD Realtor

[SD Realtor]

deleted, repeat…

SD Realtor

[SD Realtor]

deleted, repeat…

SD Realtor

[donaldduckmoore]

Littlelady, what area is that?

[donaldduckmoore]

Littlelady, what area is that?

[donaldduckmoore]

The big problem with the current house price still being elevated is because there are still lots of buyers. Unlike the housing bubble in the early 90s, there were not too many buyers. I am also waiting to buy but I guess the bubble will deflate very slowly this time because of all the subjective circumstances.

[donaldduckmoore]

The big problem with the current house price still being elevated is because there are still lots of buyers. Unlike the housing bubble in the early 90s, there were not too many buyers. I am also waiting to buy but I guess the bubble will deflate very slowly this time because of all the subjective circumstances.

[Bugs]

The only reason I can think of that some banks aren’t being very agressive about their REOs is that they must be thinking they can manage their losses. If a bank was listening to one of the economists who are saying this will be over soon it would make sense to them to try and run the clock so as to not cause more defaults by contributing to the declining prices.

The head-in-sand approach would also appear attractive to any executive whose compensation involves quarterly performance bonuses based on stock prices.

I think these attempts are akin to rearranging deck chairs. Worse, really. Sooner or later they have to move those properties, and time is not on their side.

[Bugs]

The only reason I can think of that some banks aren’t being very agressive about their REOs is that they must be thinking they can manage their losses. If a bank was listening to one of the economists who are saying this will be over soon it would make sense to them to try and run the clock so as to not cause more defaults by contributing to the declining prices.

The head-in-sand approach would also appear attractive to any executive whose compensation involves quarterly performance bonuses based on stock prices.

I think these attempts are akin to rearranging deck chairs. Worse, really. Sooner or later they have to move those properties, and time is not on their side.

[farbet]

I have been to the courthouse auctions.I haven’t seen any of the houses on the MLS after 3 months.Why foreclose in the first place? why not accept a short sale and spare the great fools for buying over their heads in the first place??
Do the various banks like HSBC,Countrywide,Wells Fargo have favorite Realtors to sell these REO’s?

[farbet]

I have been to the courthouse auctions.I haven’t seen any of the houses on the MLS after 3 months.Why foreclose in the first place? why not accept a short sale and spare the great fools for buying over their heads in the first place??
Do the various banks like HSBC,Countrywide,Wells Fargo have favorite Realtors to sell these REO’s?

[Author]

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