Market Update

Filed in Market Information by on February 13, 2015 0 Comments

ist1_12473505-businessman-with-chartGood economic news continued this month.  The economy, overall, has really performed well, bringing housing along for the ride.  Jobs, income levels and oil prices played major roles in the consumer sentiment index, reaching its highest level in a decade.  Another piece that has really helped our strong economy is the Government competing with itself.  Both Fannie/Freddie and FHA want your business and seem to be willing to fight for it.   As FHA lowers its fees, Fannie/Freddie lowers guidelines to directly compete for typical FHA business.   There has been a tremendous amount of backlash over lowering the down payment requirements, but as of now, you can get a normal conventional loan with a down payment as little as 3%.

I found an interesting report claiming that banks are now taking larger losses on short sales than taking a property through the foreclosure process (REO).  This came from a report put out by Black Knight Financial Services.  Assuming this is true, we will likely see fewer short sales, as more banks elect to do a deed in lieu of foreclosure or to complete the foreclosure process.   This is very different than we have seen over the years.  A loss on a short sale has typically been significantly less than an REO.  The pace of appreciation in most areas has really contributed to this shift.   I think this is important as it could make short sales even more challenging.

Finally, there has been a slight uptick in mortgage defaults, which could easily be viewed as a positive by real estate investors.  There is also an expectation that there will be many more defaults this year.   I read an article that there are a half a million borrowers that got government subsidized loan modifications that will start to see their payments normalize this year.  These loan rates will increase 1% per year, creating a steady increase in payments, which could result in more defaults and eventually more inventory.  There is an estimated half million of these loans adjusting this year.   This makes me wonder how many deals someone could find by advertising to people with loans that are adjusting this year?

Leave a Reply

Your email address will not be published. Required fields are marked *