The anaconda just ate a huge hog. The hog is progressing slowly through the anaconda. The hog represents the inventory of foreclosures and the anaconda is the housing market.
According to Barclay’s Capital are about 2.4 million home loans 90-plus day delinquent and about the same amount of homes already in foreclosure. This inventory of about 4.5 million in shadow inventory should reach the high point this summer and then fall off, as the market absorbs an estimated 130,000 distressed properties per month. New foreclosures dropped for the first time year-over-year since these statistics began measuring this trend since 2005. The hog should be passing towards the back half of the anaconda.
REO’s are still at record levels but the initial stages have declined substantially. Barclays’ optimistic prediction is that the worst, if not over, is close to being over. The further the hog progresses through the anaconda the fewer deals we’ll encounter. A year ago, buyers were keeping on the sidelines because they were concerned with catching a falling knife – buying a home for $250,000. only to see a comparable property fetch $230,000. three months later. We believe those days are over, which is one reason we continue to implore those on the sidelines to get in the game. Now is the time to buy.
The hog is moving towards the back half of the anaconda. Mortgage rates are another reason to buy now. The 30 year fixed rate mortgage is looming around 5% and the 15 year at about 4.5%. They will not be sinking especially given the optimistic outlook on jobs and the economy. The expectation is for mortgage rates to rise. Now is the time to buy.
We are not particularly worried about the end of the federal homebuyers tax credit. After all, the only way to discover if a market is truly healthy and viable is to stop subsidizing it. The market needs to and will return to an era of fundamentals. People recognize that the combination of low rates and lower home prices represent a great opportunity to buy today. Our market offers good fundamentally sound deals that can be financed at good economically advantageous interest rates. As this catches on, the anaconda will rid of the hog and it will be no more.
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