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California-j…, Other/Just Looking in Moreno Valley, CA

When most of the inventory of short sale and foreclosed properties, are sold, what then happens to the market. I understand thru a friend, that the

Asked by California-jewel, Moreno Valley, CA Sat Dec 5, 2009

banks and reo owned properties, are not putting them all up for sale, and that they have their reasons, what is the reason. Just curious. Thanks Linda for the advice, not ready to buy yet, but you i would interview when i would be ready. along with some others. The homes in Moreno Valley and Riverside that have not sold and are priced right, why have they not sold, if they are priced right. Will the Mission Grove area of Riverside, ever get back to where it was 3 years ago. On a whole when will the California real eastate market get to where it was, before the economy started sucking,

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Hi "Cj",

Let me first begin my response by referring to a quote by Mortgage Bond expert Barry Habib of CNBC fame: "If you think you understand everything in this market, you must be missing something."

With this in mind, and to cover the first part of your question (reasons for REO Shadow Inventory), please refer to this blog post":

"Coming to a neighborhood near you: REO Shadow Inventory"
http://www.trulia.com/blog/steve_ornellas_mba_re_mastersgri/…

The blog post focuses on the following causes of REO Shadow Inventory: 1) The Presidential Election, 2) the Troubled Asset Relief Program (TARP), 3) Direct Intention, 4) Bank Consolidation, and 5) An Ineffectual Loan Modification Program. I think you will find it a very interesting read.

Regarding Grace's post below:

I have little doubt banks and lenders are now trying to mitigate their losses by allowing former owners to "rent." Only time will tell how successful this new "program" is. Transparency into the inner workings of banks and lenders is less than clear, so it's very difficult to accurately place any relative "cause and effect" of the new "foreclosure rental program" in relation to REO supply, as is certainly also the case for those reasons I have posted in my blog.

Best, Steve
0 votes Thank Flag Link Sun Dec 6, 2009
California-jewel,

The rules and therefore the real estate market is ever changing at warp speed. What happened in 2006 was that the prices of homes went way above any kind of sustainable worth. It's a long complicated story but you were there and went through it with us.

Here's the main problem - a lack of well paying jobs in the area. That's what we need to have in order to recover. 2010 is predicted to be a slow year for appreciation due to all the foreclosures yet to hit the market. We think the banks will continue to dribble out a few homes at a time. It has been successful in keeping prices up these past nine months.

I know Riverside off the top of my head and there are only approximately 950 homes on the market. This is a very low inventory considering how many buyers that are ready, willing, and able right now. Of the 950 homes almost half of them are over priced. So that really leaves us with around 500. Of those, there are multiple offers on most of them or there will be. Only about 175 are bank owned. The balance is split between short sales and standard sales with short sales slightly out numbering the standard sales.

Without looking it up, I am pretty sure Moreno Valley is in a similar situation. A colleague of my put an offer on a home in Moreno Valley a few weeks ago and it ended up with 72 offers on it before they removed it from being an active listing. All they needed was one offer and now 71 families were off to search for something else. It's very frustrating for buyers right now due to the lack of inventory.

One of the major reasons that banks are holding on to REO's or not in a hurry to foreclose is because of their newly adopted accounting system.

Real estate is cyclical. Every 8 to 10 years prices top out followed by a bottoming out. This last run up was historical in the length of the rapid run up. In what was once called a normal market (haven't seen one of those in a long while), homes appreciated at maybe 3% or a little more a year. Not the 60 to 100+% over 4 years like we saw in our area. Prices are holding right now and they are affordable for the average incomes of our County. We may expect another run up in about 5 or 6 years. It all depends on a lot of things that no one can predict. Many neighborhoods are actually gaining just a little. But, that small gain can disapear quickly for many different reasons in 2010. I am pretty sure that these very low interest rates are not going to hold for even another year. Who knows forsure when they keep changing the rules so fast?

I've been saying it for years and I am still saying it - Riverside County needs to entice some major employers with jobs that offer good to high paying wages. It will help the local property values, take a lot of cars off the freeway into other neighboring counties, support the local economy in general, and reduce the smog among other things. A more unpopular view of mine is that they should put a moratorium on building anymore new homes until by some miracle there is enough fresh clean water for everyone who is already here.
0 votes Thank Flag Link Sun Dec 6, 2009
There is a large "shadow " inventory of homes that the banks are holding for whatever reason. Maybe to mitigate their own losses and to perhaps wait until prices stabilize, whenever that might be. Latest reports are that one in four homeowners are "underwater", meaning that they owe more than they are worth. Think about if one lost 50% on the perceived value of their home or what they bought it for and the market appreciates at a nominal rate of 6% percent a year, how many years would need to pass before the value is what they paid for it. You are in the 92555 area, as you well know that our unemployment rate is 12% or higher and according to local economists it doesn't look good for awhile longer. FHA will be changing their rules in 2010 for a buyer where a buyer will need more cash to get in and the seller concessions will be reduced. I am not sure about your statement of homes in Moreno Valley and Riverside that have not sold because most of the properties are bank owned and we are at the mercy of the banks on the pricing. Many agents are submitting 35 to 40 offers for each buyer only to be out-bid by an all cash buyer or investory.
Thanks for your inquiry. Follow my article weekly in the Press Enterprise in the Home Seller section either on Saturday or Sunday or go to PE.com and look under homes for the printed on-line edition to keep up with the current news in real estate. Richard Tegley, Broker Associate/Realtor, National Realty Group, Moreno Valley
0 votes Thank Flag Link Sat Dec 5, 2009
Hello Cali and thanks for your post.

While there are certainly a large number of foreclosure homes preparing for sale, many banks and lenders are now trying to mitigate their losses by allowing the former owners to "rent" (at market value) the foreclosed home from the bank for a period of time after foreclosure. This particular plan allows for two rather beneficial things to occur: 1) The former owners are allowed to remain in the home for a fairly lengthy period of time after the foreclosure without disrupting family, schooling or activities, while ALSO allowing the families to recuperate from the housing loss and reestablish a credit record for regular rental payments; and 2) allows the bank to forestall selling the home to allow for market recovery in the geographic area, and, thus, supports higher sales prices at a later date (which, in turn, equals less of a loss for the lender).

It is not clear yet, whether the bank will allow the former owners to buy the previously foreclosed home or how long the rental periods will last, but it does explain why so many of the foreclosure "shadow inventory" that many predict is out there has yet to hit the local MLS.

Just one explanation...I'm sure there are others!

Sincerely,
Grace Morioka, SRES, e-Pro
Area Pro Realty
0 votes Thank Flag Link Sat Dec 5, 2009
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