Are Bank Owned Homes Stalling Our Real Estate Market?

Mark,

There is no doubt that all the bank owned foreclosures are affecting the normal real estate market.

I think so. It is hard to move short sales too. I am looking forward to the Market cleaning out-Dinah Lee

Mark - In the Louisville area, things are a little better.  First-time home buyers are shying away from homes that need a lot of work because they can find a move-in ready home for an affordable price.  Plus, investors are snatching up the best deals with-in days if not hours of a home hitting the market.  That being said, we have significantly more activity in investment-grade properties, remodeled flip homes, and new construction than traditional resale.  So, your point about the wave stopping is valid.   

First thing I hear from my buyers is "What kind of deals on forclosures are out there?"

Everyone is looking for a foreclosure, well almost...short sales are a major problem and make up nearly 1/3 or more of our marketplace....and take so long....whew...let's get 'em cleared out...if only the banks were helping us!!  Unfortunately, I'm finding it's the banks that are the problem

Unfortunately, the forecast looks like there is a bigger wave of foreclosures on the way. We just saw a 503% jump in foreclosures here in Hawaii, after the temporary stay on foreclosures expired. As unemployment rises, so will the foreclosured property inventory.

Wow-503% ? That is a huge number. Looks like a good time to buy there.

I think if the banks get their act together and start working their short sale departments and REO departments to work as well as home sellers and buyers do in a regular market I think it will fix itself. But, right now I think you are right, in a couple years, we could be starting over.

Unfortunately the rules and guidelines that were implemented from a few that were breaking the law will be a direct result of exactly what you are talking about- 

Fannie/Freddie and FHA all have rules on the amount of equity one person can have in order to move up into another property. 25% or more of equity or they have to be approved for both properties.... I totally understand the reasoning behind it but it will cause more stagnat growth as a result.

Example is a young couple gradcuate from college 3 years ago, get married and purchase a starter home for $189,000. They put 5% down on a 30 yr fixed loan and start their careers as a Nurse and Engineer. Income is stable, recent baby addition and now they are ready to move up to the next level. THey have $18,000 saved for a down payment. Realotrs tell them they must sell for $170,000 in order to move property so they decide to rent this out and wait until the market turns. They call me to become pre-approved and I had to break the news that this is not an option unless they qualify for both homes.... FHA, Fannie Mae and Freddie Mac guideline.

They sit and wait- in  a house they have grown out of and in an area that they DID not want to raise their childeren. They did everything right but have to pay the price for the people that were allowed to lie and cheat purchasing a lower valued home and then let theirs go in to foreclosure.

Adding rules to the game in the middle of the game is not the answer- prosecuting those that lie & cheat clears the path for fair market players and unitl my clients have a chance to buy another home this market will stay frozen.