I've been reading some articles in our local newspaper, which I won't name since they are consistently weeks behind and usually completely backwards on their information, that have been saying that we are finally recovering a small amount in home prices etc. They have mentioned that the Twin Cities' market is up almost 20% from a year ago and inventory is on the downward move. While this is true at face value, they are failing to put two and two together as to why these stats are accurate. Let me try to address these issues and maybe shed some light as to what is coming in the somewhat near future.
I think most people would agree with me that one of the major reasons that housing has taken a huge decline in prices is because the normal seller is now competing with the short sale seller and the REO seller. I've mentioned before that banks are not in the business of owning real estate. They are much too smart for that. They are in the business of making money off of interest. If a lender ends up with the home after the foreclosure process, it's certainly just a liability on their books that needs to get rectified. They price these homes to sell and to sell fast. I've been in countless multiple offer situations in 2009 and with the exception of 1 home, there were all REO or short sale homes. Most banks are pricing the homes so they get multiple offers, or even a cash offer. Because of this, the short sale seller is able to price their home nice and low to sell fast too. Heck, what do they care, as long as the underlying investor of their loan(s) takes the offer, they are out of there. That underlying investor is going to hire someone to give them a handful of comps and if the offer is reasonable, they take it (most of the time). Typically, the handful of comps that are returned are REO or other short sale homes.
So, what about the argument that there are fewer houses on the market right now (IE: Inventory is down)? That's true. But why? Currently, there are about 500,000 REO homes on the market across the country. President Obama thought he was doing a good thing when he announced is foreclosure moratorium that was to last several months. While this did help some people keep their homes, what it really did was to force many lenders NOT to be able to sell their inventory homes on the open market? Well how many are there you may ask? 2,000,000. These homes are going to once again flood the market, which will increase inventory and most likely lower sales again.
It seems to me that fluffing information is never a good idea. It would be nice if the news channels and local papers would do a little bit of research as to why certain stats are released.
Joe Baker
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