Jobs, the Key to Real Values, Going Forward

Mortgage and Lending with Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 NMLS # 6869


“Jobs, the Key to Real Values, Going Forward”


Banks are very sensitive to the unemployment numbers. If there was declining unemployment numbers, they would put a lot more properties onto the market and unload unwanted inventory.


No one really knows, how many houses are just sitting and not on the market, even though these house could be put on the market tomorrow. These institutions are afraid of just dumping inventory and hurting real estate values.


Here is a case in point. I owe two houses and a larger storage building in Plainfield, Ct. There is an empty house that abuts the properties that I own and would like to buy it. I did some research a couple of years ago to find out who owned the property. After doing some homework, I found the law firm that was doing a foreclosure. I was able to find out that a foreclosure had started two years earlier.


I asked the attorney to communicate with the entity that is doing the foreclosure that I was interested in the property. A couple of months ago I contact the law firm to get a status. They told me that the foreclosure was completed months ago. I was given the contact information of the institution that now had title.


I was able to finally reach someone that knew about the property and asked how soon they were planning on marketing the property. She told me, that this property is not slated to go on the market until the second quarter of 2013. I couldn’t believe what I was hearing.


Job numbers and their effect on housingI told her that I was interest and could I buy the property now. She told me, that they were only putting a certain number of properties on the market per quarter. I asked why, they were waiting, since I already told her that I would buy now and pay cash for the property.


I got nowhere, but it was clear to me, there could be a lot more properties on the market, but that is not how it is going to happen.


Five Questions: Why Home Prices Are Rising


By Nick Timiraos




Prices in July were 1.2% above their year-ago levels.


Home prices through July posted their largest year-to-date rise since 2005, according to the S&P/Case-Shiller index covering 20 major metropolitan areas.


Prices rose by 5.9% from the end of last year, according to the index, compared with a 0.4% gain for the same period last year and a 2.1% gain in 2010, when tax credits fueled a burst of home sales activity.


Are price gains limited to one segment of the market—say, foreclosed properties?


Not really. Data from real-estate firm CoreLogic show that the increases are being felt across all segments of the market. Overall median home prices in August were up by 12% from one year ago, as are median prices of existing homes that aren’t distressed sales.


Median prices of bank-owned foreclosures were up by 3%, while median prices were flat on short sales, where banks approve the sale of a house for less than the mortgage-debt that’s owed. Median prices of new homes, meanwhile, are up by 6%.


There are still a lot of foreclosures. How could prices be rising?


While foreclosures are still high by historic standards, the share of bank-owned foreclosures that are selling is down sharply over the past few years. Listings of foreclosed properties are down by 24% from one year ago and by more than 45% from two years ago.


While sales of foreclosed properties, which typically sell at a discount, have fallen by about 20% from one year ago, sales of traditional homes are up by 16% from one year ago, according to Ivy Zelman, chief executive at research firm Zelman & Associates. Prices, then, are rising not only because supplies of homes for sale are down, but demand is up.


Are banks strategically holding properties off of the market?


There’s little evidence that banks have seen an increase of marketable, or ready-for-sale, foreclosed properties sitting on their books. It’s true that there are still millions of properties that are in the foreclosure process or where borrowers have missed a couple of mortgage payments, and it’s unclear when or how aggressively banks will move those properties through the foreclosure process. In many cases, lenders and other mortgage companies that handle foreclosures have struggled to meet certain state requirements governing foreclosures. But the actual volumes of foreclosed properties that are sitting on banks books are down by around 24% from one year ago.


How large is the shadow inventory?


Overall, the “shadow inventory” of potential foreclosures is down by around 500,000 from the beginning of the year. Zelman & Associates put its estimate of shadow inventory that exceeds the typical level at around 2.9 million properties.


Shadow inventory, however, is falling more slowly than expected, according to estimates from Zelman, because banks have been taking longer to process foreclosures and less successful at completing loan modifications. Zelman now expects shadow inventory to remain steady this year before falling by 20% to 2.3 million by the end of next year. Earlier estimates had put shadow inventory at 2.6 million and 1.8 million units at the end of this year and next, respectively.


Are home prices going to fall further?


Home prices typically strengthen during the seasonally strong spring and summer months, when there are more people shopping for homes. They weaken in the fall and winter. The key, then, is to monitor the year-over-year change in home prices. Prices in July were 1.2% above their year-ago levels, according to Case-Shiller, with 16 of 20 cities posting year-over-year increases.


If banks continue to push more foreclosure alternatives at a measured pace and if housing demand remains at its current levels, then “home prices are easily past their bottom and are approaching the self-reinforcing portion of the cycle,” wrote Ms. Zelman in a recent report.


The biggest risks to her forecast, she says, are weakness in job growth and the broader economy and tighter credit standards brought on by forthcoming mortgage regulations.

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Joe Petrowsky, NMLS #6869

Right Trac Financial Group, Inc. NMLS #2709

110 Main St.

Manchester, Ct. 06042

Office: 860 647-7701 x116

Fax: 860 647-8940

Cell: 860 836-9294


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Joe Petrowsky does not guarantee nor is in any way responsible for the accuracy of the information provided herein, and provides said information without warranties of any kind, either expressed or implied.

Equal Housing Statement: We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. We encourage and support an affirmative advertising and marketing program in which there are no barriers to obtaining housing becuase of race, color, religion, sex, handicap, familial status, or national origin.


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Dan Hopper
Keller Williams Realty Downtown LLC - Denver, CO
Denver Realtor / Author / Advocate/Short Sale

Joe, thanks for the information.  This is just more proof that no one really knows what is going on with the banks, and the foreclosed properties.  We have reviewed the stats many times over in regards to the forelcosure notices that are being issued.  In a couple counties we see an increase of 10-20% over last year at the same time.  Yet, less properties hitting the market.

Even in  my complex, I have a unit that was acquired by the bank, last year in December 2011, and it STILL is not on the market to sell.

Oct 04, 2012 04:16 AM #1
Jeffrey DiMuria 321.223.6253 Waves Realty
Waves Realty - Melbourne, FL
Florida Space Coast Homes hit the nail on the head here. If we do not create more non govt. jobs we are in big long term trouble.
Oct 04, 2012 04:19 AM #2
Dorie Dillard
Coldwell Banker United Realtors® ~ 512.346.1799 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good afternoon Joe,

Unbelievable..a chance to sell the property with no fuss and they are not interested!! What does that tell us about who really has a handle on getting rid of the inventory! Arghhhhhh!!!!! 

Oct 04, 2012 04:51 AM #3
Joshua Zargari
MJ Decorators Workshop LI staging and home decorating - Lynbrook, NY
MJ Decorators Workshop

I am not surprised at all...


Oct 04, 2012 05:18 AM #4
Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
Broker GA Lake Sinclair/Eatonton/Milledgeville

I'm curious... big box?  or small bank?  We're seeing some of this on a small bank local level.  They are waiting for prices to go up before they put it on the market.  If the BPO doesn't come in where they want, they just don't list.

Oct 04, 2012 06:27 AM #5
Lisa Von Domek
Lisa Von Domek Team - Dallas, TX
....Experience Isn't Expensive.... It's Priceless!

Hello Joe,

The banks are playing poker, and winning big, they have no intention of moving properties...which is evidenced by the way they handle their current inventories.

Oct 04, 2012 06:41 AM #6
Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC


Its sad to say that the banks have not done a very good job in handling the distress proprieties, but no worry its not there money.

Good luck and success.

Lou Ludwig

Oct 04, 2012 10:56 AM #7
Ellen Caruso
Daniel Gale Sotheby's International Realty - Glen Head, NY

Joe, that is a problem, why are the banks making it so hard to buy distressed properties? As a builder wife he could fix them creating jobs and turn them around, with a little profit, food on the table!

Oct 04, 2012 11:46 AM #8
Debbie Reynolds
Platinum Properties - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent

Joe, Jobs are the key to get things going in the right direction. The REO departments are even wanting to rent their properties out hoping for increased values at a later time. But a bird in the hand, is a bird in the hand.

Oct 04, 2012 12:43 PM #9
Conrad Allen
Re/Max Professional Associates - Webster, MA
Webster, Ma, Realtor

Hi Joe.  Talk about making a virtue out of incompetence.  Dumb, dumb, dumb!

Oct 04, 2012 08:48 PM #10
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