I’m seeing more and more qualified home buyers holding back from actually buying based on the continueing folk legend that Banks are restricting the release of REO properties to avoid a glut of inventory which would drive prices down. The story is that a huge surge of new REO’s are coming to market in the fall and that will be the time to be a Buyer.
I believe this is total nonsense as the Banks have no sensible reason tho do this, and a very strong financial reason to do the exact opposite.
It has always been my understanding that once an NOD (Step 1 in the actual foreclosure process) is recorded the Bank has an official “Non Performing Asset” which must be excluded from their FDIC required reserves, and must be replaced immediately from other assets. This inevitably reduces the amount available for new lending.
If this is so then the Banks are strongly motivated to get whatever they can, as quickly as they can, for any REO properties they hold. The money recieved can then go back into the “Funds Available for Lending Pool” from where it can be loaned out to create new mortgages i.e. “Performing Assetts”. This is how banks make profits.
Can anyone comment on my understanding of this and offer suggestions on how we can counter this market distorting perception.
Most successful Realtors know the truth of my Title (Paraphrased from ex Speaker of the House of Representatives Tip O’Neill “All politics is local”).
Unfortunately many of our clients get most of their information from the talking heads and empty suits of the mass media whose purpose is to sell advertising, with LITTLE or NO REGARD to TRUTH or CONTEXT.
They are therefore led to believe that any house can be bought for at least 20% less than a year ago, anywhere it happens to be located.
Here are a couple of facts that might be thrown into the running conversations about “How’s the market”
Over the past 10 years the average home price has INCREASED by 6.2% Nationwide.
Over the past 20 years the average home price INCREASE has been 4.7% Nationwide.
Source www.ofheo.gov
These are way below the numbers for Santa Clara County (Silicon Valley) where I live and work, and they are way above the numbers for Dallas Texas.
The Morale is “East San Jose is NOT Palo Alto. Sacramento County is NOT Santa Clara County, Southern California is NOT North California”. Florida statistics are not relevant to any other State.
ALL REAL ESTATE IS LOCAL
These days when every mass media empty suit is competing to see who can spread the most gloom and doom let me point out one very positive outcome of all this, especially for the Real Estate Market.
It’s great for mortgage interest rates. When stock markets go down it’s because a lot of people are selling. Where do you think they put the money received from the sales?
How about the traditional safe haven BONDS? This drives up the prices on Bonds.
When Bond prices go up, interest rates go down. That is exactly what happened yesterday when we saw 2 reductions and modified rate sheets during one day.
If your mortgage was in process you might have received a call late yesterday to discuss locking in the interest rate.
Here in Silicon Valley we are in the middle of the most amazing 1st time Buyer market i’ve seen in my 20 plus years working here.
We have an much higher than normal number of Short Sales and REO properties. While for numerous reasons short sales are just sitting out there, the REO properties are flying off the market as quick as they arrive, and in most cases with multiple offers.
For a great summary on this topic check out Scott Schang’s blog at http://www.californiateachersandemployeeshomeloanprograms.com/buying-homes-in-a-bidding-war-understanding-competitive-markets/
Once you begin thinking about buying a house the most important thing to is do is find out two things:
1. How much a Bank will lend you.
2. How much your payments will be (including taxes and insurance)
There is little point in going out looking at open houses etc if you don’t know whether you can afford them. Save yourself a lot of time and frustration by getting Pre Approved. This is NOT the same thing as Pre-Qualified.
Pre-approved means you have a written commitment from a chosen Lender stating that your personal financial data has been checked out and your loan is ready to go as soon as you have a contract on a suitable home. Now is the time to get out for some serious house hunting knowing exactly what you can afford.
Pre-qualification is next to useless. This simply means you have given some general information to a Lender who can “honestly” say that providing what you say is true you will be able to get a loan. Until your income, credit, down payment, etc has all been proven you are not really ready to start looking.
