The next several years will be interesting time in housing markets across the country, to say the least, but they may bring good news.
First, let’s get the dismal statistics out of the way. As of right now there are over 850,000 homeowners in California who are delinquent on their mortgages (or an estimated one in five homeowners, according to Zillow.com). Although the number of bank owned (REO) properties has declined over the last six months, according to RealtyTrac, only about 1/3 of the delinquent homeowners have received notices of foreclosure. Banks and other lenders currently own millions of properties nation-wide that were purchased at foreclosure sales, and due to the moratoria that were imposed at the end of last year (and then extended), the majority of those properties are not on the market yet. This sounds negative, but there may be a very positive outcome.
What does this mean? In simple terms the lenders will have to sell these properties. In the past that meant selling at a big discount, which brought down surrounding property values. The good news is that THIS time around we may avoid declining values, even as REO properties are placed on the market.
Due to the limited inventory on the market and favorable market conditions (low interest rates, lower prices and other incentives to purchase) many lenders with houses in their portfolios seem to be waiting to list those properties. If they slowly release them to the market it will help satisfy the demand, which will help prices stabilize or rise and benefit both buyers, sellers and the lender-owners. Here is a bit more detail:
If you are a buyer or investor the inundation of foreclosure and REO properties in the coming years could be a huge benefit to you, no matter how fast they are released to the market (if you are not in a hurry to purchase), as the inventory will continue to improve and deals on homes in neighborhoods you may not have been able to afford in the past will be ripe.
If you are a seller and inventory is slowly listed by the lender-owners, this may likely keep your home value steady or slightly higher. It will depend on how many properties are released and on the specific area and inventory levels.
So market news seems to be positive, but there are still many homeowners facing foreclosure or are unable to pay their mortgages.
What is Being Done to Help Struggling Homeowners?
First, the government continues to put pressure on lenders to speed up the loan modification process. The problem is that many homeowners, due to economic circumstances, will not qualify for the reworked loans, so modifications may not be the golden ticket for long.
A second option mentioned in the press is to just have the servicers place ALL their REO properties on the market at once. As scary as this may seem, especially in hard hit states like California, Nevada and Arizona, it would be a â€šÃ„Ãºget it over withâ€šÃ„Ã¹ attitude that could possibly be less painful in the end by shortening the time it takes to get through the inventory, thus bringing back a â€šÃ„Ãºnormalâ€šÃ„Ã¹ market in more quickly. It is doubtful the lenders will opt for this since it would net lower prices for their inventory of homes and have a detrimental impact on the market. It also does not have any benefit at all for homeowners needing assistance.
Another solution discussed by President Obama last week involves allowing homeowners to stay in their homes as renters after the property has been sold to a new owner, an investor. It seems like a win-win situation for both sides: the investor has an instant tenant (who will likely take better care of the home, as it was the family home) and receives income on the property. The homeowner-turned-tenant gets to stay in the home and has a much lower monthly payment. They also do not have to pay property taxes and many maintenance costs on the home.
We are entering an interesting time in this country which will likely bring many new changes. The housing market seems to be gaining momentum and if timed right the release of lender-owned properties to MLSs across the country could be beneficial to buyers and sellers alike. Whether or not any available programs will really help those facing foreclosure is questionable, and there is a rush to come up with forms of assistance that will work.
If you are facing foreclosure and do not know the options that may be available to you, or if you would like to learn about ways you can get help, please visit www.MortgageWalkawayOptions.com.