Several days ago, I wrote about the much publicized wave of foreclosures that has yet to materialize, Is the REO bubble over in Phoenix?. Later that day, I read Mortgage delinquencies hit record high.
We live in a time of uncertainty, and consternation.
I’ve spent the past couple of days mulling over the differences between the two reports, and come up with the following:
- One view is short-term and doesn’t have the benefit of seeing the number of delinquencies that are actually on the bank’s books.
- Banks have been counseling their clients to stop paying their mortgages, before requesting a short-sale consideration. This aspect of mortgage delinquencies does not get mentioned much, but talk to a seller who’s behind, and I bet you the bank may have recommended they stop paying their mortgage.
- The number of short sales is increasing, and even though banks are much too slow in closing these sales, there is some improvement. Some banks now actually seem motivated to work with the seller and their agent.
- And, as the second article mentioned, the current loan modification and refinancing plan may help a bit, but not those who have lost their jobs.
A client, who has been waiting and watching the market for almost four years, asked me yesterday if I thought the timing was right to buy now. It’s always a difficult and dangerous question to answer. I’m not sure whether house prices have bottomed, although there are indications that they have. I do know that another client was complaining about interest rates going up, which has an impact, by reducing buying power.
Whether there is, or isn’t, another tsunami of foreclosures remains to be seen. If there is, banks will continue to price them according to the market, which at this point appears to be stabilized, and if there aren’t, then we can all breathe a collective sigh of relief, while we continue to work towards a more balanced and sustainable real estate market.
{ 4 comments }
“Banks have been counseling their clients to stop paying their mortgages, before requesting a short-sale consideration”
This reminds me of an article I recently read where an out-of-work Boston banking exec documented the entire process of his foreclosure. When the home finally went to the auction block, just three people showed-up to bid. Two would-be home buyers and a guy who represented the original lender. The bank outbid the two people and bought it back from itself. But instead of slapping a for-sale sign on the front lawn, they just locked it up. Apparently with all the great govt bailout dollars floating around, the bank intended to just wrap it up with dozens of other homes and package it as a huge lot to the feds. So, in essence, the federal banking bailout is competing with the free market and that (in my opinion) results only in lowered prices. The bailout is not helping the market. The bailout is helping the lenders. Exactly why the government should leave the market alone.
Eric, Do you have a link to the article you referenced? I’d like to read it.
I can’t believe I was able to find it so quickly:
http://www.msnbc.msn.com/id/29516455/
It’s very sad story. And I felt that the saddest part was really a sidenote on how the government banking bailout is actually PREVENTING people from being able to work out deals with their lenders. You see, the lenders like to have futures that they can (no pun intended) “bank” on. They might not make a killing, but f they know for certain that the federal government will let them package their bad debt together and sell it back to the feds for a known price, the bank will always choose that over the uncertainty of 1) your ability to stay employed and 2) the uncertainty of the market.
Twitter: drubloomfield
06.05.09 at 6:00 am
Thanks for the link, Eric.
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