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Is a second wave of foreclosures in our future?
By Mark Karten on October 6, 2009
I am happy to report that I was able to get my computer fixed today. If you're interested in my repair saga, click HERE.
Here's today's topic - the new TV season has begun and I'm engrossed in a show called FlashForward. The premise is that everyone in the world "blacks out" at the same time for 2 minutes, 17 seconds. During that time, each person sees a glimpse of their lives six months from now. Some see good things, others very bad. It's more like a movie rather than a TV show, click HERE to watch the first two episodes.
Although the government and some of the media are touting that the recession is almost over, and that employment is the last hurdle to recover, I don't think so. I believe this is more like the "eye of the storm" and we're in for a repeat of the foreclosure tsunami we've experienced already.
I am amazed at how far banks have come with their "understanding" of the financial difficulties that homeowners are experiencing. We went from little cooperation on short sales to an expedited process of getting deals approved and closed (with certain banks) in less than two months, although the norm is a 2-6 month painful process.
Before most lenders will consider a short sale, they require a borrower apply for a loan modification. Many times this is a joke, because there really is no modification, just a minor reduction of the interest rate or extending the term of the mortgage that still doesn't allow the homeowner any breathing room to catch up with payments or ease their financial strain. What we're now seeing is that homeowners are defaulting, in large numbers, on their loan modifications.
Now, as told in the Wall Street Journal, banks are starting to write off a portion of the loan itself. Approximately 10% of all loan modification requests result in the lender lowering the principal amount by up to 18% or more. This is a huge step toward reducing foreclosures, and each home saved is a win for everyone - the homeowner and his family, the bank and the community. Click HERE for the full story.
So that was our "good flashforward," now here's the bad one. According to a NY-based mortgage bond analyst, there are "approximately 7 million new foreclosure properties that are going to hit the market in the near future. This is 5 1/2 times the amount that we went through (as a nation) in 2005." Click HERE to read the full article.
With Nevada being number one in the country through our last wave, we can safely assume we are going to have a major portion of the new foreclosure listings. Does this report seem accurate? Unfortunately, it does. Every month we see the reports of homes sold at the Trustee's sale and yet only a small number of these homes get listed for sale. This inventory has been increasing while the banks keep control of the available homes to stabilize and increase prices.
What does this mean for buyers and sellers? If your home is listed or you're considering the sale of your home, you must be aggressive in your pricing. As the article states, prices will decline somewhere between 6 and 13% more.
As a buyer in this market, whether as your primary residence or as an investor, this is going to be a great opportunity to find the home(s) of your dreams. The competition has been so tough due to the diminished inventory that now this will be the perfect second chance at success.
The downside? Interest rates are moving upward and we will most likely see rates in the 6% range, rather than the 4's and 5's.
As always, if you're looking to buy or sell a home anywhere in Las Vegas we appreciate the opportunity to represent you in a smooth, stress-free sale or purchase. We love referrals, too.
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