HOW SWEET IT IS!

For many years, particularly the years of soaring home values and equity gains where just owning a house made you an instant investor, home buyers had to move quick when they found a home that fit their wants, needs, and desires.

Can you imagine a scenario in today’s slower market, when homes are averaging hundreds of days on the market where the same may be true? Make no bones about it, it exists.
Let’s briefly reflect on how we arrived where we are today. Loans buyers couldn’t afford. Unscrupulous lenders with teaser rates that re-set to higher rates after a couple years. Government programs that forced banks to loan to less than qualified borrowers. These ingredients were a recipe for disaster.

Now we have a situation where the news is reporting a recent increase in home sales. I also seen an interview on TV where the vice president of some large real estate company was boasting about zero down loan programs for first time home buyers. Ever hear that old adage “don’t believe everything you hear”? Believe it, but that’s a topic for another day.

Although great news, that increase is not an indication of a market recovery, it’s merely a symptom of market activity and an indication of what IS selling. Since the second quarter of 2006 the market has been in steady decline. Bank Foreclosures and Short Sale properties have been flooding the market and from what I see with increasing unemployment numbers that scenario is not changing any time soon.

Here’s the rub. When banks foreclose they generally re-list at very affordable AS-IS prices to compensate buyers for the condition of the properties, which many times is very poor. Banks do not make repairs, make no warranties and make no representations so with bank owned homes being sold for up to 50% off of typical market prices there is a huge push by investors to pick up these foreclosed properties. Hence boosting the number of sales.

Short Sales have also contributed to the increased numbers, yet lag far behind bank owned homes. Does that translate to a recovery? In my opinion, no. There remains a glut of foreclosed homes and every Short Sale that does not sell will eventually become a foreclosed property so until we reduce the amount of foreclosures, sell off the vast majority of current inventory and get unemployment under control, we will continue to see the down ward slide. The good news is home prices are very affordable which has buyers and investors singing “how sweet it is”…