When it comes to experts in the foreclosure arena, there doesn’t seem to be a shortage. However, when you sort through the experts, only a few stand out.
In an article on Yahoo, a gentleman named Peter Flint, CEO of Trulia, was interviewed.
I would bet, from his perspective, he has a better handle on this thing called foreclosure, as it really exists, than most others. I’ll pick a couple of his quotes and make a comment or two.
Peter Flint Speaks
Flint: “Next year “government interventions will start to disappear, shadow inventory will hit the market and mortgage rates will start to rise” to around 6 percent from under 5 percent, he said. “We’re in a false state of stability.”
Comment: I’m not sure government interventions will totally disappear. I say this because of all the crap coming out of D.C. on extending incentives/tax credits. I don’t know where interest rates will land, but 6 percent seems to be a good number given the fed has expressed no desire to raise rates.
By the way, in case you don’t know, shadow inventory includes houses that banks now hold but have yet to put up for sale. Nobody knows how many of those exist. Should the number be larger than expected, this could gravely impact the situation further.
Flint: Two-thirds of buyers expect to get a discount of at least 30 percent for a foreclosure.
Comment: I guess those folks aren’t investors. Investors expect a discount far greater than 30 percent. And in my neck of the woods, they’ve been getting it too.
Flint: “Double-digit unemployment will push more owners into foreclosure, further destabilizing the housing market and pressing prices down another 5 to 10 percent, said Flint.”
Comment: Double digit unemployment has a way of pushing homeowners into foreclosure. More foreclosures has a way of destabilizing the housing market. I don’t think this is earth shattering news unless you are the one who lost his job.
Flint: “We don’t believe we will get back to normal levels of foreclosure activity on a month-to-month basis until probably the end of 2012, and we will still be going through the shadow inventory well into 2013.”
Comment: Read the years Flint mentions. Just a few short months ago, the year normal levels would be reached was 2010. If he is correct, methinks the problem runs deeper than we’ve been led to believe.
Flint: “The percentage of Americans at least somewhat likely to consider buying a foreclosed home fell to 43 percent in November, sharply below May’s 55 percent, according to a survey by Harris Interactive.”
Comment: This may or may not be saying that the investor pool has become saturated and the excess inventory will be with us for a lot longer than we want it to be. Then again, it may be saying that Joe and Mary Sixpack, while once interested in buying a foreclosure, have retreated from the market. That wouldn’t be a surprise given all of the “intricacies” involved when buying a foreclosure. The Sixpacks of the world very rarely want to endure the stress.
Where Are We
I’m not totally sure what to make of all the information surfacing in the foreclosure arena. However, I do hold a hard core belief that we won’t be out of this mess until two or three years into the new administration. If I’m correct, normal levels won’t return until 2015 or 2016.
My opinion is based on events in other fields. For example, I follow the “go green” movement and I follow cap and trade being foisted on us. I won’t take the time to illuminate their relevance to real estate in this post. I’ll save that for a later day.
These aren’t the only two arenas I watch but they are by far the ones with the most potential whammies for us real estate types. So, to answer where are we, will have to wait for another post.