COMMENTARY – June 2012: No serious real estate salesperson likes the product selection today. If you are a buyer, you know there is a lot of competition for the small number of homes on the market. The nice homes get multiple offers with some far exceeding the asking price and, for the nicest homes, some buyers are risking their contingencies to “get in the game”. As a listing agent, it is nice to see offers that don’t require an appraisal. But as a buyers agent, that is usually the last contingency to waive. The market is so hungry for inventory that buyers are resorting to really goofy stuff. But “goofy is as goofy does” and the winner is the buyer who weighs the risks and swings their hardest.
Don’t believe that the market is perfect, though. The government is entirely involved although they may be hiding behind the curtain (or behind each process). Lenders still have regulations to obey. Appraisers have a lot more rules than before. Title and escrow companies are under strict rules. As you may know, even sellers are getting “regulated” as witnessed by the requirement that your home contain at least 1 carbon monoxide detector. The government corrupts anything they touch. It’s the reverse Midas Touch. Instead of alchemy, the government corrodes and erodes value. Please pray we can reduce the monster.
What will change, and when? We can all watch the news and be paralyzed from the plethora of market forces that seem to contradict each other. For example, lending rates are so very low yet so is inventory. Prices are stabilizing yet many homes are sitting vacant [or in default]. The opportunities for your money are limited and prices are at all-time lows. So those looking for a home are getting frustrated, with good reason. With such a perfect time for buying, there’s nothing to buy. (Unless you call me.)
Interest rates are staying low because the USA is still the least risky play for big money. But left to an uncorrupted market, these rates will not stay this low. If rates go to 5%, many will be sad but that, too, is an astonishingly good interest rate. Have we been ruined by low rates? There are other reasons to pick a good lender but buyers have been conditioned by that single item. Do your shopping or ask me for a good lender.
Short sales have been an increasingly large part of this market. Lenders with distressed borrowers are moving more quickly. New regulations (some good ones) are forcing lenders to respond in 30-45 days rather than the 5-month average in the past. But selling short may not be the best solution for the borrower. In my opinion, a short sale is akin to cutting a dead branch off a tree in order to save the tree. In that case, a short sale is appropriate; a credit score recovers more quickly; the neighborhood values experience less downward pressure; and the curb-appeal of the home is maintained as sellers do provide some care during the sales process.
To our benefit, the US Senate has been absent from their duties. But what could change is, obviously, the turnover expected [and desired] in November. With the removal of the Senate “cattle guard” from the road, we may get to audit the Fed. And what we learn from behind that curtain may be too embarrassing to expose. (Some kimonos should stay closed).
Shadow inventory has been part of the dialogue for 5+ years. A home is considered part of the “shadow inventory” as soon as the borrower becomes delinquent. Once the home is offered as a Short Sale or when the foreclosing bank has put it on the market, it is “out of the shadows”. So if you or anyone you know is in this situation or approaching it, call me. I’m here to help and I’m NOT from the government.
Here are my interpretations and prognostications with regard to the Major Indicators:
- Sales are equal to last year BUT inventory is 60% lower.
- Momentum changes are positive with 39 zip codes experiencing an Up Tick in June.
- Months’ Inventory is STILL incredibly low = 0.8 (that means we would sell all homes in 24 days, if no new listings are added)