This bandwagon is is getting so crowded that they may need to order a bus for the overflow…And I am sorry to say, a lot of those riding that bandwagon are real estate agents and the National Association of Realtors themselves.
Come down off of that bandwagon and lets start with a look at the most recent Mortgage Purchase Application report, below:
Down a bit more than 2 percent from the previous month, and maintaining the anemic range it has been mired in since mid 2009. All the while with unbelievably low mortgage rates. What is going to happen when the Fed can’t ( or won’t) keep rates down any longer? Do you think purchase applications will increase, and remain strong?
So, are we to believe that the housing market is on its way back…but mortgage applications are remaining this weak? They’ll answer that with the “cash buyers” comeback. But cash buyers can’t revive a market of this magnitude. The fact is, the majority of cash buyers are investors looking only for cash-flow. And this cash flow happens mainly at the low end of the market. The day-to-day buyer competition for homes in the under $150k market is insane. But this is the market that cash flows well for investors holding homes as rentals or looking to do a quick rehab and flip.
Also, remember, with all of my comments I am drawing real-life experiences and stats from the local market…and most of the news you hear is a compilation of national or regional stats and analysis.
Next…from a drum I’ve been banging on for 2 years…the FHA loan. Continually, since 2009, I have been saying that the next wave of upside-down and soon the be foreclosed upon owners are recent FHA buyers. With only a required 3.5% down payment, typical seller contributions of 3% towards the buyers closing costs AND the credit score necessary to qualify for an FHA in the low 600’s..what could possibly go wrong? Add to that the transaction costs of selling a home and your FHA buyer is upside-down the day they drive the home off the lot!
The number of FHA insured loans has doubled from 2007 to 2012. So, with a doubling of loans in the last few years (after the height of the market), one would expect THE PERCENTAGE of FHA delinquencies to decline, right? They’re adding millions of brand new loans to the books, so these new loans, in this era of more stringent underwriting and appraisal standards must be really well performing loans…well, not so much. Look at the % of delinquencies and homes in the FC process in mid 2007 and then mid 2012…It’s actually higher now? With the number of loans DOUBLED and the delinquency rate HIGHER…that does not bode well.
Then, add to that the huge increase in foreclosure filings here in Palm Beach County beginning in March of this year…curiously coincidental with the states attorneys general signing off on a “slap of the wrist” to the big lenders for basically all of the robo-signing and other fraudulent practices. Every month since March has seen a tremendous increase in Lis Pendens here. And that will translate to a huge increase in either bank-owned sales 12-24 months from now or a huge increase in short sales in a bit of a shorter time frame. In either case, there will be a tremendous increase in “distressed sales”, which inarguably have a downward effect on home values.
Next...look at the Zillow graphic below. Just under half of all of the mortgages in Palm Beach County are under water.
As a matter of fact, right now, over HALF of all pending sales in Palm Beach County are short sales, and another 10% of the pending sales are bank owned. That’s over 60% of all upcoming sales being distressed sales…and that’s BEFORE the huge increase in Lis Pendens takes its full effect.
Folks, we are in a small “good time to sell” bubble right now. I predict that bubble will last until about mid November.
If you’re a seller (or wanna be seller), don’t wait to pull the trigger.
If you’re a buyer…it could be a decent time to buy, but you’d better buy the right house, in the right location, at the right price and have the right buy and hold strategy and a solid job.
I could go on with more charts and statistics…but most people won’t even read this far!
If you’d like to give me your opinion on this…or get together to discuss your selling or buying needs, give me a call or shoot me an email.
Thanks for reading…Steve Jackson, 561.602.1258
