Question for all the realists out there...What is your opinion on a real time table for market stablity? Including, reduced foreclosures and short

Asked by Joel Maher, Salisbury, MD Tue Jul 13, 2010

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Joel Maher’s answer
Joel Maher, Agent, Salisbury, MD
Wed Jul 14, 2010
Everyone has some very good posts to this question! I do believe every area has its own set of variables that add or subtract to the markets stability. I get asked this same question by all types of people. This is what I generally tell them: If you have 10 listings in a neighborhood and one of them is a short sale or foreclosure, you as the buyer will go where first? Whether experts or home buyers want to acknowledge this or not, that is the true reality of our market. Once these waves of foreclosures and short sales start to slow down and subside, only then can our market recover. We can go into the whole mortgage lending side of it and how diligent they work to make sure your I's are dotted and T's are crossed but that just adds to the smaller pool of available buyers. Also, in our local market, short sales and foreclosures make up at least 70% of the market. One of the reasons is our beach town of Ocean City, MD. Many of the second homes were ditched in order for sellers to stay afloat. Now the fair market is fighting over the other 30% of the real estate market. They are drowning right now and simply cannot compete. We have to alleviate the pressure sometime soon in order to keep the real estate market from crashing again. Ahh that felt good to get off my chest!
1 vote
Lewis Poretz…, , Annapolis, MD
Tue Jul 13, 2010
BEST ANSWER
Dan Chase - excellent answers. It is very clear why you have a VIP designation.

I feel redundant as I post the same scenario over and over again but here goes.

You owe 300K on a house that was worth 400K four years ago. Two houses in your neighborhood get foreclosed and sold for about 275K each. Another house down the road settles at a short sale for 250K. You begin crunching numbers and realize that if we assume we are at the bottom at 250K, it could take ten years just to owe what your house is worth.

Well guess what, maybe a few of your neighbors got one of those 100% interest only loans four years ago. And they owe 400K on a house that is now worth 250K. So they crunch the numbers and realize the best business decision is to either work out a short sale, deed in lieu or flat out strategically default (stop paying the mortgage). Now your house which you still owe 300K has it's value further depressed to 225K.

It is a vicious cycle. And all these people who lose their homes are being removed from the pool of consumers who qualify for a mortgage ---->>>> until consumers can qualify for mortgages in masses housing prices will not find the bottom. It is a natural correction in an unnatural economic landscape. It is a vicious cycle. And frankly, it sucks!

Now here is a thought that will surely irate many. The government and all the experts out there must stop pointing fingers at bad loans, credit mismanagement and over spending. Who cares! Pointing the blame is not going to fix the problem. I believe the real estate market took us into this nose dive and the real estate market is going to have to pull us out.... I believe the government is going to have to lend money to consumers who have had a recent foreclosure or bankruptcy or strategically defaulted. As Dan Chase pointed out, things are getting worse and the only thing that will stop it is homes that get sold..... Loans are harder to today than they were last month. just my .02 cents
1 vote
Lewis Poretz…, , Annapolis, MD
Tue Jul 13, 2010
Dunes - would have given you two thumbs up if it would have let me... Nice post!
1 vote
Voices Member, , Benton County, OR
Tue Jul 13, 2010
The answer will differ Property to Property and Block to Block and Neighborhood to Neighborhood and Town to Town and and and

It will depend on local factors..Employment, Income levels, Potential Growth, County Budgets, State Budgets, Services (Fire, Schools, Police, Road Maintenance ect.) and often those are impacted by National Factors (Grants, Funding for Projects, Matching Funds ect.)

Right now things are being impacted Heavily by a National Budget Crisis and an impact on Public Perception influenced by National Events..Unemployment, Foreclosures, failure of Loan Mods, Tax Credits and and...In other words the PUBLIC'S PERCEPTION of Events Nationally is impacting even those Local Markets that one could argue are stable to a degree where it is safe to Buy..

But as long as the Public's Perception tells them otherwise ya can blow all the Smoke and Data ya want...They ain't gonna listen...What would they hear anyway?
"It's all local, Interest Rates have never been lower, large inventory, Lowest Prices"..
That been the Pitch since 2006 by NAR and many RE Pros & now as far as most of the Public is Concerned the Industry has just been "The Boy who Cried Wolf" "Same ol Same ol"

IMHO the Industry/Agents/RE Pros have been using their Social Media "Expertise" to get Leads/Spam...They should have been using it to get Credibility and Build Trust...Image...

Now instead ya got a Depressed National Market & Image, few leads and a hell of a road to travel to convince People YOUR local Market is not the National Market cause they think yer just cryin Wolf again to find leads

Ain't sayin it's right or fair just that it is what it is and the RE Industry Locally or Nationally was not passive or innocent in making it that way..They would have been far better off IMO pushing for Real Solutions or Accountability for the last few years than in Lobbying for Tax Credits, Spending Money and Time on.."Good time to Buy" Campaigns

Real Time Table for Market Stability.....Depends on what happens next week, next year...just what happens next and what the RE Industry does with what happens
1 vote
Bob Movin-On, , Hartford, CT
Tue Jul 13, 2010
As stated, it depends on the area, but here are some numbers you should consider:
7.5 million foreclosures to date with less than 25% resold. And foreclosures are on the rise again.
The 7.5 "families", which means that number should be increase by 25% or more due to separation and divorce after foreclosure, will not be eligible to obtain another mortgage for another 5 to 7 years at a minimum, most people haven't even started working toward getting things in order so they could make themselves eligible and many just do not want the head ache of owning a home with a mortgage again. Add to that short sales and deed-in-lieu-of, which we have no numbers for, those people can not reenter the market for 2 to 4 years. Many claim first time home buyers will make up the difference, well did they forget first time home buyer-ship has always been there and it is pretty constant with small increases each year. Sorry but until short sales, deed-in-lieu-of and foreclosures stop the 5 to 7 year clock will not start clicking therefore my best guess is 10 years.

Bob Patrick
Buy a home after foreclosure expert
1 vote
Dan Chase, Home Buyer, Texas City, TX
Tue Jul 13, 2010
"A lot of people forget, in a "good" market a house will increase in value an average of 5% a year."

And what realtors forget is that inflation in a normal market is about 5% a year. That means in a real market prices remain stable.

If the federal reserve would stop just printing more money so $1 remained worth $1 after 10 years house prices would change little if at all.
1 vote
Dan Chase, Home Buyer, Texas City, TX
Tue Jul 13, 2010
Bad mortgages will be resetting in great numbers through 2012.

IMF: Mortgage Reset Chart
http://www.calculatedriskblog.com/2007/10/imf-mortgage-reset…

Crash Coming? Does the Infamous Mortgage Reset Chart Matter?
http://www.nakedhedgefund.com/finance/next-crash-does-the-in…

Loan reset threat looms till 2012
http://mortgage.ocregister.com/2009/05/20/loan-reset-threat-…

It could take a year for a foreclosure to be a completed foreclosure. That goes to 2013.
The large amount of foreclosures could take anywhere from 1-4 years to sell off to remove that pricing pressure. That could be anywhere from 2014 to 2017.

Then you have other issues to deal with.
Will unemployment ever decrease?
Will people be able to borrow money for mortgages?
Will lending standards get even tighter?
Will banks refuse to make a mortgage to anyone who had a foreclosure or short sale in the last 15 years?
Will people feel good about the economy and be willing to buy?
Will the economy recover or will it be like the great depression and these problems last for well over a decade?
Will people look at real estate as a good investment ever again?
Will buying make more financial sense than renting does?

There are a lot of unanswerable questions here. Although the issues at hand are apparent the resolution of those issues is in great doubt. There is no way to know when or if the housing market will ever come back strong again.

May 21, 2010
41 Percent of borrowers would strategically default
http://immoralhazard.housingstorm.com/2010/05/21/41-percent-…

Survey: 59% of Borrowers Would Not Walk Away if Underwater
http://www.dsnews.com/articles/survey-59-of-borrowers-would-…

If prices drop and people just walk away that could drive prices even lower than they should arrive at. here is no way to know the final results here.
1 vote
Scott Godzyk, Agent, Manchester, NH
Tue Jul 13, 2010
The answer will differ from state to state, here in New England some area's were not hit as hard as other places in the country. The unemployemnt rate is MUCH lower than the national average here in NH.

The 2 problems are there are people who want to purchase, the banks just are not loaning any money right now.

The 2nd problem is teh banks are witholding properties from teh market which will lengthen the ability to recover until foreclosures stop coming on the market with such numbers.
1 vote
Spirit Messi…, Agent, Tucson, AZ
Tue Jul 13, 2010
This "answer" changes from city to city, state to state. I believe the states with the biggest booms are still feeling the biggest busts (Las Vegas, Phoenix, and etc). Much like the stock market, hard to catch a falling knife. The market is still declining here in Tucson, AZ. However, if you look at the big picture now is a decent time to buy for a primary residence. Rates at historic lows and etc. Do I think the price may fall a bit more, sure. But like with stocks, if you look at the big picture 10 yrs from now, think you will be in good shape. A lot of people forget, in a "good" market a house will increase in value an average of 5% a year. A lot of home buyers were spoiled with 50%growth for a couple of years, which clearly the market could not sustain. Anyone who claims they know for sure either way, I would like to see into their crystal ball. At this point, waiting for the market to stop declining.
1 vote
Brian Gormley, , Montgomery County, MD
Tue Jul 13, 2010
most people think 2-5 years. i wouldn't be surprised if the short sale window started to close in 12-18 months, depending on how employment trends. that's a "started" to close. the values still have to come back up enough for folks to avoid having to do a short sale, so they will around for a while after that. will be longer for REO's to clear out of the system, especially with the significant shadow inventory that is being held out of the market. I just don't see Freddie/FNMA flooding the market and swallowing the price adjustment medicine all at once.
1 vote
Lewis Poretz…, , Annapolis, MD
Tue Jul 13, 2010
2013 - we have to hit bottom first, then I anticipate we bounce around the bottom for a while.... things are still getting worse
1 vote
Voices Member, , Benton County, OR
Thu Jul 15, 2010
News Flash.... "things have stopped getting worse, and they stopped getting worse a year ago"
http://politicsandsociety.usc.edu/2010/07/real-estate-recove…

How could I have been so wrong? Well nice talkin to everyone but guess any more discussion about Market Stability is moot now...
0 votes
Voices Member, , Benton County, OR
Thu Jul 15, 2010
0 votes
Lewis Poretz…, , Annapolis, MD
Thu Jul 15, 2010
Dunes - here is a quote from your post you link to below -

"First you find a way to stablelize values then increasing values comes into play. You can't skip the first step because you are too focused on the second step in this process is my opinion"...

had to give you a thumbs up... regardless of everything else - until home values stabilize there is no end in sight... I am not talking about home values not falling as fast as the previous month. We need to see many months of no loss in property values and we need to see many months of increased home sales.

it's kind of like the gun and the bullet... what was the cause of death? Remove them both and there you go.... Stop home prices from falling and make it easier for consumers to get loans..

All the finger pointers out there who want to blame, blame, blame.... keep on blaming until your home fall underwater and then let's see what you have to say... I do not see how values can stop falling with an overabundant supply of inventory for sale and foreclosures and short sales adding to the inventory daily.

Do you realize that the option arms and interest only arms are not predicted to adjust until 2011.... what happens then when those mortgages reset and a percentage of them default as consumers can't handle the increased payment?

Thanks for keeping this post going... take a gander at the link below just out from the Wall Street Journal
Web Reference:  http://bit.ly/9V6Ds2
0 votes
Voices Member, , Benton County, OR
Thu Jul 15, 2010
Hey Lewis

Thanks for the interesting interview to view (I missed it) and your Blog was/is very interesting ect. also..

I participated in this Discussion here at Trulia a while back

Do you think interest rates will go up next year? ...Wed Dec 9 2009
http://www.trulia.com//voices/Financing/Do_you_think_interes…

I would like to ask Lewis and Joel to give it a look plus any others interested (But please read it from beginning to end) because I think it explains/defines fairly well my views and I'm hoping maybe I could get your views about a Conclusion/Idea/Senario Which I discuss toward the end of the Discussion/Thread..

If Joel does not mind of course..

In any case I wish to let ya both know it has been a pleasure so far to hear your views and I do appreciate your having a Discussion that IMHO contains important things for the Consumers/members of the public passing thru to consider..Thanks
0 votes
Lewis Poretz…, , Annapolis, MD
Thu Jul 15, 2010
Check out the video on the link below.... this lady has her finger on the pulse... thoughts?
0 votes
Dan Chase, Home Buyer, Texas City, TX
Thu Jul 15, 2010
Perhaps the link below will give you some more insight. Dunes found it, I simply repost it here.

July 14, 2010, 3:11 p.m. EDT
Weak economy for extended period, Fed says
Commentary: High unemployment, low inflation as far as the eye can see
http://www.marketwatch.com/story/weak-economy-for-extended-p…


It could take five to six years before the U.S. economy is fully healed from the Great Recession of 2008, officials at the Federal Reserve said Wednesday.

(if the economy takes 5-6 years to recover shouldn't the housing market take equally as long?)
0 votes
Voices Member, , Benton County, OR
Wed Jul 14, 2010
Joel

Thanks and thumbs up for you...

What you feel about Ocean City is how I feel about the Oregon Coast Properties at this time plus many of the Rural communities on Rivers/Lakes ect. ect which we have a lot of..When you toss in the Decline in Tourism because of the Economy and the Loss of Jobs in the Logging & Fishing industries, then the Small businesses, schools, county budgets, road repairs, emergency services, clinics, hospitals those communities supported and the Job losses there..

And then add the Cities with their difficulties........Yikes!!!!!!!
0 votes
Voices Member, , Benton County, OR
Tue Jul 13, 2010
Thanks Lewis

Like a Monkey on a typewriter I was bound to put together some coherent words/thoughts eventually..

Congrads on the Best Answer, they are given or gotten seldom...Yours is Deserved

@JOEL...Thanks for Posting and then taking the Time to give a Best Answer....What's your opinion?

I enjoy Threads like this that are Civil and where all who post share their Honest opinion, thanks to all as I'm sure the Public appreciates it..

Listen to me I sound like I won an Oscar...I'd also like to thank my Production staff Billy Bob and.....Guess I better quit lol...

Best to all
0 votes
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