There is a great deal of buzzing going on right now as to the impact of the lifting of the government mandated moratorium on foreclosures. You may recall that back in November and December of 2010 the government issued another moratorium on most foreclosures with the hope of shifting some of those mortgages, homeowners and lien holders into a loan modification program. The hope was that the slowdown in foreclosures and the attempt at modifying some of these mortgages would somehow help keep people in their homes and help in the overall economic recovery. You will receive a number of different opinions as to its success or failure and just wait for the elections of 2012 to see the various spins that you will hear on the subject.
Now that this moratorium has been lifted, these lending institutions have been busy with the foreclosure process and are moving towards liquidating those assets. With this comes the fear of increased inventory in our local real estate markets and the potential for a slowing of the overall recovery. No one really knows how much inventory will actually hit the open market and some local markets may not be affected at all. I think we should be realistic that there will be some impact but at the same time I continue to remain cautiously optimistic with the forecasts that I read and follow.
One thing that I can say with complete certainty is that; this increased inventory will bring a number of opportunities both in the immediate and also in the long term. In the immediate future there will be a number of deals to be had for those with the resources to make that happen. These buying opportunities will be one way in which the recovery process will begin and although it will be painful for some, the end result will move us toward a shrinking supply of homes. Those who have the ability to hold on to their home will continue to wait, they will continue to hunker down and save. Most of the sales will be the bank owned homes (REO’s) and short sales. This will pretty much be a repeat of what we experienced in 2010. I don’t see that it will cause a dramatic reduction in home prices (on the high side perhaps an additional 10%), nor do I see it as a further implosion of the Real Estate market. I believe that the actual demand for houses will outpace the supply in the not so near future from the simple reality that housing starts (new construction) remains so low. As the population increases (and it is) there will just be no way to meet the demand as new construction is way behind the curve and as such the existing housing supply will begin to decrease. When this happens we will begin to see house prices rise at approximately 4% to 6% per year and in some markets ever greater than that.
It is even possible we will start to see the supply of homes level out or even decrease toward the later part of 2011. With a spurious 2012 election year on the horizon; we may also see a number of new political promises that will be pitches as incentives and opportunities that will help to create this new demand for housing. I think it was Will Rogers who back in the 1930’s said; “Buy land, they aren’t making any more of it”. Perhaps we need a reminder that real estate remains a good investment and even though we have experienced some significant loss in property values these past several years; the potential is there for better times in the not too distant future.
Written by
Mike Southwick
Use by permission only
No comments:
Post a Comment