Got Foreclosure! - Blog

Here is a sign of a shift in the REO market dynamics.

I just got off the phone with one of my REO listing agents that are supplying me with deals, and she told me that her own listings have been bought up left and right over the past 2 months. In fact, she said, her listing inventory of 40 properties was down to 15 as of this writing (we’re talking “bread-and-butter, Inland Empire”).

That’s an impressive buying spurt after a long time of stalemate markets.

What has changed, and why are buyers buying? Two things:

1. Banks and bank appraisers have become a lot more realistic with regards to the perceived values. We’re seeing lower asking prices, as well as accepted offers that would have been considered “low ball” only a short while ago.
2. Buyers perceive that a drop in price of approximately 50% off the peak value (give or take a few), presents a good buying opportunity. Combined with still low interest rates it’s time to jump in for many.

And maybe that should give pause to an overly pessimistic market outlook. We know that bank owned invetories are still increasing, and prices might slide further. But on the other hand, buyers are currently artificailly decimated by an overly tight lending environment.

Once lenders will have worked out their “credit issues”, with interest rates still low, and prices even lower, buying activity will jump. One of the more interesting numbers in the monthly housing reports is the “typical mortgage payment that home buyers committed themselves to paying”. Last month it was $1,606 in Southern California, according to Dataquick. That was down 28% from $2,230 in March 2007.

This is an immediate saving to the household budgets of families, and translates into a big relief of the pressure on affordability. Higher affordability, lower prices, and still low interest rates could bring about a tipping point for buying activity very quickly as soon as lenders are willing to lend again.

The only thing that might be missing here is buyers’ ability to come up with a down payment. But alas, help is available! Down payment assistance programs are becoming available. Ask for it when you create your VIP buyers profile!

For the astute rehabber/investor this means big business maybe right around the corner. Many bank owned properties are not fit to be sold to a retail buyer. They need to be rehabbed before a new lender will touch them.

Time to roll up your sleeves. Get to work, and don’t miss this huge opportunity.

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