October 15, 2009

7 Million Foreclosures Predicted Before 2013?

First, the good news. There are trillions of dollars on the sidelines waiting for a place to land. Once valuation confidence is established we will see our real estate rebound. It will be at re-set pricing, but we will rebound. Our research indicates that Luxury Ambassadors and other top producers in each office are seeing completed transactions. However, let’s shed some daylight on the overall picture. Across the Nation we are hearing that there very high end of real estate held without a mortgage is moving. Large double digit million dollar all cash sales are occurring with substantial price reductions negotiated. But, they are happening!

On the other end of the spectrum, sales at the low end of the market (due mostly to the $8,000 credit) are driving up the housing stats but at least 50% of these sales are short sales or foreclosures, weighted highly on the foreclosure side which is highly advantageous to the financial institutions (Click Here) So, yes, the real estate sales numbers are improving and we do have a pulse, but the middle to the $5 Million price range is bottlenecked, which would represent the “move up” market and the confidence indicator.

What seems to be agreed upon by most researchers is that there are about 90 million homes in the U.S. (includes all types like attached, detached, mobile, etc.) One in three homes are fully owned, i.e., no mortgage at all, so that leaves 60 million homes with a mortgage. The estimate of 7 million total foreclosures (by the time this mess is over) is only slightly more than one in 7 homes.

Until this tsunami is under control and these homes are moved into the system to establish a base line in valuation, consumers will not have the confidence to once again actively enter the market. Fear of over paying is stronger than the motivation of historically low interest rates and news indicating prices have been slashed by at least 25% Nationwide.

The Banks. What’s Behind the Curtain?

I believe the truth is…that no one truly knows. There is so much conflicting data reported by respected sources, actually almost as many differing opinions as there are reports!

Lou Barnes reported in Inman News on Friday, October 9th that: Elizabeth Warren, congressional overseer for the Troubled Asset Relief Program overseer and blunt Harvard University professor, spoke the unspeakable yesterday: Foreclosures are completely out of control and threaten the whole economy.

Steve Murray, Editor of Real Trends, states in his update "Homeowners Will Walk" on October 13th indicates that: Nearly 1 in 3 homeowners will walk away from their mortgages if housing prices continue to fall, according to a new survey by Housing Predictor. Findings to the online Predictor Poll were similar to a survey taken in March. Some 32% said they would walk away from their home if housing prices keep falling. The latest survey was completed Oct. 11. A large majority who took part in the poll or 68% said they would not walk from their mortgages. In March 36% said they would walk from their mortgages, demonstrating major changes in the way Americans feel about bankers in response to the financial crisis. Homeowners' have historically felt responsible to fulfill their contractual agreements to pay mortgages back. But a new trend is developing in light of widespread criticisms of banking practices.

To summarize information gleaned from the FDIC Web Site and other financial websites listed below:

• Huge numbers of foreclosed homes have already been sold, as we know from the high percentage of sales attributed to foreclosures. Not in REO now.
• Big numbers of homes have yet to foreclose, but they will. Not in REO yet.
• Short sales never show up as REO.
• The value and number may be questionable. Banks don't classify a property as REO until they absolutely have to - as it is the ultimate capital hit following a loan they have given up on entirely. Looking at the numbers, many just about or just foreclosed homes are being carried as bad loans. Witness the over $7 trillion in loans outstanding and the over $210 billion in reserves for bad debts.

Aside from no desire to book a home as REO, we know they are horribly behind in this area and are probably behind in proper accounting as well. To drill deeper into the details, please review these links:

http://www.cnbc.com/id/33018385/for/cnbc/
http://www.bankforeclosuressale.com/wp/article-07161095.html
http://washingtonindependent.com/32159/communities-slammed-by-surge-in-bank-owned-homes

Of course, the big question is ….how much more money is expected by and will be poured into the financial institutions once they unload and write down both the real estate and the “bad loans”?

Foreclosure Alternatives

One of the questions I am most often asked is if we have any information on what the banks are planning to do with all of the real estate on their books. We know that there are dark pools of investors interested in purchasing ‘chunks” of these assets and offers are currently being negotiated. This would make sense as we all know that the banks are not equipped or trained to move such huge quantities of real estate. What and how….and the impact to all of us…. is yet to unfold. More uncertainty.

Our Luxury Ambassadors, the consummate professionals in the real estate industry, have access to an Investor Group that can offer a softer landing to owners with jumbo loans faced with foreclosure. They can purchase the property with a cash offer as a short sale alternative, rather than a foreclosure thus limiting the damage to credit scores and secondary trauma. For more information, please contact InvestorGroupContact@UniqueGlobalEstates.com.

I firmly believe in the creativity and strength of the American people and I also believe that once all of the facts are known and transparent, we Americans, with the right and the ability to contact our congressional representatives, will take the facts, as they are, and figure out how to work through it successfully.

We always have...

Treasure Hunting, Incredible Value

	Salt Lake City, Utah $5,000,000 (USD) UGE ID 274248 Presented by: Gale Frandsen Prudential Utah Real Estate
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	Kamuela, Hawaii $1,599,000 (USD) UGE ID 268449 Presented by: Katie Minkus Hawaii Life Real Estate Services, LLC
Priced well below what the seller bought this property for in 2004! ...WOW!
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