[As in all editions of this blog, the BEST BUYS follow immediately after the text of the article below]
Anyone who doesn’t live on a remote desert island knows that we are experiencing the most challenging economic climate since the Great Depression. The tailspin our economy has endured over the last couple of years began with “the housing crisis”– the “mortgage bubble” that was created by predatory lending practices and irresponsible borrowing, combined with years of accelerating appreciation in home values that most people thought would never end. The net result of this is that an increasing number of homeowners owe more on their homes than the properties are worth– in some cases, substantially more. By some estimates, more than 25% of all homeowners in the United States fall into this most unenviable position. As foreclosures continue to accelerate and short sales and REO’s flood the market of homes for sale, downward pressure on home values will continue. Until these “distressed properties” are absorbed by the market, the percentage of “underwater” homeowners (those who owe more on their homes than they are worth) will continue to rise.
I will define “short sales” in the previous edition of this blog, and I will discuss “REO” properties in another edition. For those who do not really understand the general categories of distressed properties, I would suggest that you review the previous discussion before you continue. These terms are tossed around frequently these days by people who do not fully understand their meaning.
The conditions described above have created a real “buyers’ market,” and while it is possible that we have reached or are close to reaching a “market bottom” (the point at which prices are as low as they are going) and can expect a rebound in the Charlotte area by the end of 2011 or the beginning of 2012, I would watch closely new foreclosure filings. Foreclosure filings have been tapering off in 2011, and if this trend continues, less short sales and REO’s are destined to come into the market, replacing those that have been absorbed. Until the stream of distressed properties entering the market begins to dry up, the downward pressure on property values will probably not subside. There have been some signs in recent months that REO's are being absorbed into the market at a faster rate than they are being replaced in the Charlotte area.
The water near the bottom is very murky, and it may not be possible to know we have reached the bottom until we get there. If we have not reached bottom yet, we are probably close.
Another factor for the potential buyer to consider in this market is interest rates. The Federal Reserve has intentionally kept interest rates extremely low in an effort to strengthen the recovery of this delicate economy. The Fed has promised to do this for an extended period of time. But that cannot and will not continue indefinately. As the economy gradually regains some balance, this consideration, combined with the notion that we are reaching a bottom in home values/prices, render this a very favorable time to buy a home or investment property.
Having said all that, how does a buyer find the “bargains?” Have you ever noticed the advertisements for “Free Foreclosure Lists” and recommendations of distressed properties? Of course you have; the Internet and print media are littered with them. Haven’t you ever wondered where these lists and recommendations come from? Is there some great secret resource that no one but “insiders” and the publishers of such lists is aware of? Of course not!
Think about it. Lenders acquire properties in their REO inventories by foreclosure. (See the last edition of my blog for more about this.) They don’t want these properties; the properties are really just a liability to them. Banks are not in the business of owning property; they are in the business of lending money. They want to dispose of these properties as quickly as possible. Why would they maintain some secret list that only a select few are privy to? Of course, the answer is they would not. They want as much exposure as possible because they want these properties sold and off their books– yesterday! Any Realtor who is a member of the Multiple Listing Service (”MLS”), and is competent enough to use it effectively, can quickly and easily find and prepare a list of properties in the foreclosure process… or REO’s that are currently bank-owned… or short sales. There is nothing mysterious about it, and anyone who would lead you to believe that they possess some secret list of opportunities no one else knows about is probably not being as forthright with you as they could or should be. And deception is probably not the best way to begin a relationship with a professional in whom you plan to place your confidence and trust.
Those of us who monitor the market and do our homework can and do compile lists of distressed properties, after doing varying degrees of analysis to determine if they really do offer value. But this information is nothing "secret." In the context of the debate about whether we have reached a “market bottom” in housing prices, my Best Buys for this edition include two short sales. I try to avoid short sales for all the reasons discussed in the previous edition of this blog. The fact that these properties are identified in this blog indicates that many of the best REO listings in the Charlotte area have recently gone under contract, and that supports my feeling that we may have reached a bottom– or we may be very close. The “Best Buys” follow below:
(1)Huge Four Bedroom 3.5 Bath Full Brick Waxhaw Home Listed over $110,000 Below Tax Value:
Listing Price Reduced to $239,900.00 Tax assessed value is $350,470 for this huge 4BR 3.5BA upscale Waxhaw home with 3-car garage in the highly desirable Cuthbertson School District. However, this is a short sale, and as I have cautioned in the past, unless the listing agent has gotten pre-approval from the seller's lender of the listing price, the listing price may bear little relationship to what the home can actually be purchased for. Nonethess, this home is loaded with upgrades, from heavy use of crown molding to solid surface countertops. The community features a club house, pool, recreation area, tennis courts and walking trails. If a buyer has time to muddle through the short sale process, this might be a great value.
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(2)Larger 4 Bedroom 2.5 Bath Indian Trail Home Reduced to Under $160,000:
Listing Price Reduced to $159,900.00 This one is not a short sale. Tax value is $170,910. The home advertises nearly 2,400 square feet, a fenced back yard, 2-car garage, spacious rooms and a community that includes walking trails and a playground. Schools are Sartis Elementary, Porter Ridge Middle School and Porter Ridge High School. All with an asking price of under $160,000.
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(3)Upscale Uptown Charlotte 1/1 Condominium Listed for Less than $125,000:
Listing Price: $124,900.00 OK; this one is also a short sale, but the listing agent advertises that he is experienced with short sales and I would hope that implies he has the seller's lender's approval of the listing price in advance. This 1/1 is located in the heart of everything in the beautiful Fifth and Poplar building. The unit features granite countertops and stainless steel appliances in the kitchen, of course. It also includes a storage unit and secure parking. There are awesome views from the balcony, and the complex has 24-hour concierge service, a fitness center, billiard room, 24-hour Starbucks and a Harris Teeter grocery store on the main level. With a listing price of under $125,000, this is Uptown living at its finest.
Of course, as discussed above, this continues to be a ”buyer’s market,” and there are many other great opportunities on the market at this time. Naturally, one of the main reasons I take the time to publish this blog is to offer to go to work finding youa great deal on your next home or investment. It’s what I do best, and I love what I do. As I have said in every edition of my blog, “solid analysis identifies great opportunities.” I would be more than happy to answer any questions or read any comments you might have. Take advantage of all the tools and resources available on my website, including the ability to SEARCH THOUSANDS OF HOMES FREE: http://edorer.wilkinsonandassociates.com. Or please feel free to contact me.
The next edition of CHARLOTTE REAL ESTATE BEST BUYS, with new information, observations and “best buys” will be published on or before December 1, 2011. Thanks for your interest.
Eric J. Dorer, B.S., J.D.
NC/SC Broker/Realtor
Wilkinson and Associates Real Estate
NAR Certified Short Sales and Foreclosures Resource (SFR)
(980)875-0950
email: ejdorer@gmail.com
Web site: http://edorer.wilkinsonandassociates.com
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