Why the Housing Market Won’t Improve Soon
While most real estate agents and brokers are desperately searching for signs that the housing market is recovering, those signs are simply not there yet. The foreclosures keep flowing with no let up in sight. And there’s yet another set of statistics that show the current historic high of available REO properties isn’t going to be going down any time soon – as a matter of fact, more REO records could end up being set.
At the “Calculated Risk” blog, they make the case that, after a housing bubble bursts, there is a correlation between home price recovery and unemployment. According to their study of housing bubbles in the late 1970’s and 1980’s, real house prices continued to decline after these bubbles burst – basically until the unemployment rate peaked. Then prices remained fairly stagnant for a few years after that.
Since most economic experts agree that unemployment isn’t close to peaking yet – and since this particular housing bubble was much bigger than the other two cited – that suggests real estate prices aren’t about to start inching upward for months to come. That means more homeowners staying “underwater” (their houses worth less than they owe on them), as well as more mortgage holders struggling to make their monthly payments. Every housing expert expects many more REO properties to come through the pipeline.
Also, the boom in foreclosures in the residential market is now being joined by a spike in foreclosures in commercial sector. The number of commercial properties, including office and retail buildings, facing foreclosure in the coming months is said to be massive. Las Vegas is ranked #1 with commercial properties in default, with about $9.7 billion worth of properties in distress.
Michael Campbell, managing partner of Colliers International, said that banks have requested that his firm take over management of many different commercial properties – everything from completely undeveloped land to the 7000 yards-plus golf course in Las Vegas, Stallion Mountain.
Campbell also said he was hoping lenders would rewrite loans, but that may end up being impossible. “I would say we are headed in a downward direction, but I don’t see that it has ramped up yet,” Campbell said. “With all these loans coming due, there will be more defaults and foreclosures.”
Will anything stop these REO foreclosures? Not likely. The government and industry programs designed to ease foreclosures to date haven’t been very successful. Moratoriums have just put off the inevitable and a lot of mortgage holders just aren’t going to qualify for the bailout programs. Refinancing isn’t going to help with interest rates where they are.
The good news is that REO sellers are getting a lot of activity on their properties from cash-rich investors who know a great deal when they see it. But with many more REO listings coming down the road, REO agents and brokers will still find themselves keeping very busy.
ASREOS. com, the home of ASREOS, the American Society of REO Specialists, is growing in leaps and bounds to help REO professionals gain a competitive edge and get access to these lucrative listings.