Nick at the WSJ.com has an article (click here) about how the flow of foreclosures will drive pricing in the the real estate market. Some excerpts:
Regulators relaxed mark-to-market accounting rules, giving banks more flexibility in valuing certain real-estate assets and removing some of the impetus for banks to quickly foreclose.
Meanwhile, the Obama administration put in place an ambitious program to modify mortgages. The Home Affordable Modification Program has fallen short of its goals. So far, fewer than 500,000 loans have been modified, below the target of three million to four million. Yet the program served as a “closet moratorium” on foreclosures that stanched the flow of bank-owned homes to the market, said Ronald Temple, portfolio manager at Lazard Asset Management.
While more tax credits aren’t likely, policy makers could still attack the supply problem by, for example, taking foreclosed homes off the market and renting them out.
The lenders and servicers are going to keep coming up with ways to delay the inevitable. You can’t blame them, it is working well in their favor – the lenders/investors are spared the losses for now, and service fees continue to rack up.
Here is a comparison of the counts of local SFRs on the auction list:
| Town or Area | Dec ’09 | Today |
| Cardiff | ||
| Carlsbad | ||
| Carmel Valley | ||
| Del Mar | ||
| Encinitas | ||
| La Jolla | ||
| RSF | ||
| Solana Beach | ||
| NSDCo.Coastal |
It’s possible that fewer homeowners are in default, but it’s more likely that servicers aren’t pursuing foreclosures in earnest. I still think that if the servicers cut loose with more REO listings, the subsequent surge in sales could cause pricing to trend upward before too long. There are plenty of buyers, we need more well-priced inventory!
Bill is on the story too:
http://www.calculatedriskblog.com/2010/09/house-prices-and-foreclosures.html
Good to see that banks can game the system.
It seems like the problem these days isn’t the volume of foreclosures, but the bigger loss on each one.
Yeah, the longer they wait the more money they’ll lose. Such a deal.
The servicers should test-drive the idea that there is pent-up demand for well-priced inventory.
You can tell that they either haven’t considered the idea, or have discarded it already.
It goes for any seller around North SD County Coastal – Put $5,000 of clean-up into a vacant house and price it 5% under recent comps, and you’ll be in escrow within 10 days.
Seems the banks are the ones making things worse by not lending money to people.The more prices go down the more people walk.
I’ve seen a lot of mention these days that indicate that “pulling the band-aid off fast” is gathering steam and back on the table.
At some point, it makes more financial sense on a larger scale to get new owners into the property who are paying on the note, shopping for improvements at Home Depot and paying the property taxes.
All these people taking advantage of the free rent program probably aren’t paying their property taxes either or HOA’s. Why would you if you think there’s a chance you’ll either walk away or end up foreclosed? The loss of property tax revenue has to be killing local governments.
interview with head of Century 21, several mentions of southern california / San Diego
http://money.cnn.com/video/news/2009/05/29/news.052909.crnrcent21.cnnmoney/
Art #7 – Its not a ‘loss’ of tax revenue, its a ‘delay’ of tax revenue. The back taxes will get paid once its foreclosed upon.
Whoever buys it at auction (bank or 3rd party) is liable for back taxes.
Thus, the fed’s willingness to set the table for banks to delay foreclosure is causing a massive amount of the extended delay in local property tax payments being recouped.
Faster these homes get foreclosed, the faster the back taxes are paid and the better off the local gov bank accounts are.
Jim,Plenty of Buyers in my part of Sonoma County,plenty of inventory too. Not much in the way of well priced inventory though, it doesn’t last long.