It’s commonly maintained that home price declines could only take place in the face of widespread job loss. There is something to this idea, but it is not precisely correct. In truth, it is forced sellers who put downward pressure on home prices.
These are the owners who need to accept whatever price they can get for their homes. Absent forced sellers, home prices will likely hang tough because sellers won’t have any good reason to accept lower bids. But when the number of people who have to sell grows too much in comparison to the number of willing buyers, prices start heading down.
It’s certainly true that unemployment can increase the ranks of people who need to sell their homes, which in turn leads to price declines. Where the conventional wisdom goes wrong is assuming that unemployment is the only possible cause of forced selling.
read more at voiceofsandiego.org
As usual, makes sense, Rich.
As usual, makes sense, Rich.
I agree with you Rich. Again
I agree with you Rich. Again though, what has intrigued me of late is that REO properties have not been priced aggressively. Hopefully that will change.
SD Realtor
If they price them
If they price them aggressively, all those loans they wrote the last three years as ARMs are underwater. They know they need to refinance as many as possible to keep them from going belly up. If they maintain pricing, they help maintain comps, which in turn will allow them to refinance all those cruddy loans into even cruddier ones (higher APR, same onerous terms) because now they’re at higher LTVs.
Pretty nice set up actually, wait for a greater fool, in the mean time, take all those previous loans and write even more sub-prime loans because now the numbers don’t work, but the owners have to refinance or go belly-up, so they make fees, fees, fees.
Have lurked for quite a
Have lurked for quite a while and enjoy your posts.
A good friend and fellow RE bear who has been bubble sitting for a year recently closed a short sale from WaMu. The property was originally listed a year ago for $895,000 as a flip. Relisted 3 months later at $750,000, off market for 6 months, showed up as an REO for $535,000 in December and my friend moved on it. 1 day MT. 2,200 sf, single story, remodeled. WaMu had a loan of $750,000 on it, owner never moved in. A piece of anectodal evidence from my end of the world has been the dramatic increase of ‘very distressed’ borrowers over the past 9 months. Sadly, there is very little to be done for many of them.
Forced sales:
Let’s not
Forced sales:
Let’s not forget divorces and medical problems leading to financial crises.