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When they put all the foreclosures on the market there will be plenty of supply. It's an artificial shortage.
But they are NOT going to put ALL the foreclosures on the market.
This is why the "Mark It to Market" victory by the big banks was such a game changer a few years ago. It allows the banks to artificially inflate the housing stocks on their books, allowing them to stay solvent, and no need to get rid of the foreclosures in a hurry. In fact, if they throw ALL the foreclosures on the market they'd be driving themselves out of business. Why'd they do that?
This is what many people don't understand, especially those complaining of this shadow inventory - they will eventually sell all of them, but very very gradually and methodically. Think years or maybe a decade even.
Until we see 6%+ rates and ARMs being the norm, we aren't even close to the last bubble. Once NINJA loans come back in full force run for the hills.
I see the market going up slowly but surely until that happens. Increasing interest rates will cause some strange state of panic buying as you may be priced out forever-ever. The frenzy will continue and the govt will keep adjusting interest rates to match. Eventually all the people who could get in under somewhat normal conditions will dry up. Then once again all the loans to everyone including pets, homeless people, and dead people will start up.
We are probably at the beginning of this as people still need to qualify for loans under some form of standards which probably stopped a lot of sales in the last month or so. If credit doesn't loosen up, then the prices will go back down. And it seems the govt. is doing anything possible to keep house prices and the stock market going up.
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
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Quote:
Originally Posted by Rakin
Home prices here are up 12-23%.
Several major corporations are relocating to DFW.
Immigration to North TX continues from other states.
Builders are selling faster than they can build.
There is a shortage of home inventory in many areas.
With all the above, I predict the DFW market will stay extremely strong for the next few years.
For the OP; This is the best LOCAL advice you are likely to get on this forum.
But they are NOT going to put ALL the foreclosures on the market.
This is why the "Mark It to Market" victory by the big banks was such a game changer a few years ago. It allows the banks to artificially inflate the housing stocks on their books, allowing them to stay solvent, and no need to get rid of the foreclosures in a hurry. In fact, if they throw ALL the foreclosures on the market they'd be driving themselves out of business. Why'd they do that?
This is what many people don't understand, especially those complaining of this shadow inventory - they will eventually sell all of them, but very very gradually and methodically. Think years or maybe a decade even.
EXACTLY. There is not one entity holding all foreclosures who is going to open the dam. It will remain a convoluted process, which will drip foreclosures into the market at a medium pace.
As rates rise, guidelines will ease. Not stupid-ease, but we will likely see avenues for Self-Employed borrowers, and the return of a more prolific 2nds market, more 80/10/10, 80/15/5 action. This will keep purchase business growing, even with rates a point or two higher than they are now.
... but, you still have to do your own thinking, based on specific, local conditions, neighborhood, financial issues, etc..
Think about it this way. The 'housing market' is like the 'job market' -- The majority of people have both houses and jobs ... thus, regardless of what the 'markets' do, they are okay. Similarly, people without houses or jobs, need only ONE of EACH; and what the 'market' in general does, will not really define the solution to their need.
People get in trouble when they start following major trends, instead of their own specific situation and analysis. By the time a 'trend' becomes 'major', it is invariably too late for the followers to successfully 'catch-up.'
OP...you have been given a number of pieces of anecdotal evidence. I would add that there has been substantial 'institutional' buying...hedge funds, investment funds, private investors...which has put a floor under the market. There was also a perception that QE was about to end, and that rates are likely to go up, therefore you better get in while you can.
So we saw a pop over the past few months as demand surged, prices pooped, and activity increased.
So, now what?
Well, the conspiratorialists would say that the government was behind the 'institutional' pop. Somehow they encouraged buyers to get in and scoop up thousands of single family homes. Literally, many of these funds bought thousands of homes at a clip--big developments, for instance, which they have turned around and offered for rent. Should prices rise from here, the institutions will be sellers--not buyers.
Then you have the banks sitting on thousand (millions?) of homes which are under water. Little by little these homes are being released to the market, and will tend to put a cap on prices and growth.
Then you have the retail buyer--you and me. Are we done? Did anyone who 'could' buy do it in the past few months? Are the remaining renters (millions of them) unable to put together a down payment or otherwise find themselves unable to purchase a home?
If you can develop answers to these questions you can establish a picture of where the market is headed.
My own view is that we have seen a bottom, and that things will slowly rise from here for some period of time.
Don't forget, however, that the economy is running on gas from the Federal Reserve. Corporate profits are driven by increasing margins, and not generally by improved sales--which means that the consumer isn't splurging on anything right now. Should the Fed discontinue its pump priming, we could enter a deflationary period which could have horrible consequence on the housing market. If the pump priming is successful and the economy starts to breath on its own, the housing market could climb substantially from these levels. There are, after all, a LOT of folks who are in temporary housing who would like to be in their own home.
It is a very challenging time to forecast markets. They are being artificially manipulated on a scale never before seen in America. Figure out how all of that ends, and you will have a sense of where the housing market is going. Right now it all feels VERY fickle and like it could go either way--quickly. Therefore, it will probably continue to bumble along--slowly!
But they are NOT going to put ALL the foreclosures on the market.
This is why the "Mark It to Market" victory by the big banks was such a game changer a few years ago. It allows the banks to artificially inflate the housing stocks on their books, allowing them to stay solvent, and no need to get rid of the foreclosures in a hurry. In fact, if they throw ALL the foreclosures on the market they'd be driving themselves out of business. Why'd they do that?
This is what many people don't understand, especially those complaining of this shadow inventory - they will eventually sell all of them, but very very gradually and methodically. Think years or maybe a decade even.
Honestly I don't know for how long banks could keep all there foreclosures off the market. Sooner or later vacant (read houses with no AC - no heater) will be in the condition noone will want to buy it. Not sure about other places, but vacant house being without AC for over a year is at VERY high risk of mold INSIDE the walls...
I kept track of houses like that in our neighborhood and all foreclosed houses were bought by investors... and rented out shortly... Basically, people who are renting are living with mold... Mold will not dissapear by itself... and it's hard to treat when it's hidden behind drywalls.
So, all these vacant houses banks are keeping are going down the hill. I guess it just the matter of time when somebody will be sued for mold issues. I found it interesting real estate agent don't like to mention or even talk about this issue and standard home inspection cannot catch these issues.
More people are looking into new construction for that reason, so foreclosed vacant homes is nothing for banks to count for.
IMO of course...
The reason we see so many buyers is because many people who went through short sale/ foreclosure are not back to the game... these people have cash for large downpayment (hell yeh they were living rent free for years) which is enough to get a new mortgage... I would say there will be many buyers for another 3-4 years, which means prices and rate will be going up until the histort will repeat itself.
... but, you still have to do your own thinking, based on specific, local conditions, neighborhood, financial issues, etc..
Think about it this way. The 'housing market' is like the 'job market' -- The majority of people have both houses and jobs ... thus, regardless of what the 'markets' do, they are okay. Similarly, people without houses or jobs, need only ONE of EACH; and what the 'market' in general does, will not really define the solution to their need.
People get in trouble when they start following major trends, instead of their own specific situation and analysis. By the time a 'trend' becomes 'major', it is invariably too late for the followers to successfully 'catch-up.'
ie coming in the Market now is a johnny come lately?
Bidding Wars? Yes, could be sign of a bubble before the crash.
Housing shortages? Unlikely.
Until I see the market flooded with supply and the prices are still going up, I'm not too worried about a crash.
Bidding wars and tight supply (or the perception of such) go hand in hand.
Tight supply may be a product of investor activity, which does not necessarily predict strong long term demand.
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