I’ve listed to the CNBC pundits who say that the US Housing market is past hitting the bottom and things are looking up. Then I’ve read reports on other Real Estate “Focused” sites that said – “we are not even close to being at the bottom yet!” Who do you believe?
The Neigh Sayers:
Realty Trac and others that look at Foreclosed property and “shadow inventory” predict that at least 25% more foreclosed or distressed, bank owned properties will hit the market in 2012 as compared to 2011.
An inventory of distressed properties (foreclosures and short sales) will be coming to market this year. This inventory has been delayed for over a year as the Federal and state governments crafted an agreement with the five largest banks and mortgage servicers to establish a roadmap for how a foreclosure must be properly completed. That agreement, the National Mortgage Settlement, was reached two weeks ago.
This is probably a fair assessment – the Banks now have the freedom to decide what they are going to do with these properties that they own. No doubt, many of those properties could hit the market, which would cause home prices to go down… because just like anything else, the housing market is determined by supply and demand. If there’s too much supply – the price goes down.
The folks betting against a recovery also point to high gas prices. $5 a gallon makes everyone more concerned about their jobs, taking on additional financial debt… etc.
The More Positive Types
The more positive commentators would point out that last summer President Obama released part of the Strategic Oil Reserves, thus keeping the cost of gas artificially low. (At some point, we need to all figure out how to drive gas efficient cars, but that’s not going to happen overnight) Considering that this is an election year – the Obama Administration might be swayed to believe that this is a good idea for 2012. Our current reserves (as of Feb 2012) are at 95%.
Treasury Secretary Timothy Geithner seemed to signal a possible new release when he told CNBC on Friday that “there’s a case for the use of the reserve in some circumstances, and we’ll continue to look at those and evaluate that carefully.”
There’s also a couple of new programs that might be available to banks ,that were not available at the beginning of 2011. Why would Chase, for instance, want to take a $100,000 loss on a home – that’s lost value from the time it initially put a mortgage loan on it… and force prices even lower? These guys are bankers… they don’t want to take a larger loss on an asset!
Their “answer” to the problem? Rent out the REO houses, and take income on them. That way – the banks keeping the asset on their books at the original value, it’s not having to take a loss, it’s receiving monthly income… a much more “Banker” friendly answer. Another idea floated by Bernanke and others is for municipalities to purchase or foreclose on abandoned neighborhoods and “destruct” the property – making it available for parks and recreation.
Federal Reserve Chairman Ben Bernanke on Friday made a renewed push for programs to convert foreclosed homes into rental units as another mechanism to help revive the housing market. “With home prices falling and rents rising, it could make sense in some markets to turn some of the foreclosed homes into rental properties,” Bernanke said in a speech in Orlando at the National Association of Home Builders conference. “Real-estate-owned to rental programs appear to have some potential for success.”
Where does this leave potential home buyers? If you are looking for a home in Raleigh, or thinking you want to buy a house in Cary – you should call us. We are POSITIVE that mortgage interest rates have not been this low in our lifetime. We don’t have a crystal ball – but we believe in Election Year Rallies, and we think the government MIGHT be close to coming up with some good options! If that’s true – your chance to get a good deal on a house is a pretty small window. (We checked, and most houses in our area are selling for 94% of list price right now!)
The other things worth noting about all of this? RENTS are going up. It really IS cheaper to own versus rent in many parts of Raleigh!
More good news! Raleigh is expected to be one of the top real estate markets to watch in 2012~ because we have jobs! Steve Thorne 919-649-5058 We offer the best mortgage rates!