Distressed Sales and Foreclosure Lists Demystified - PART ONE

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 several 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 continued to accelerate and short sales and REO’s flooded the market of homes for sale, downward pressure on home values will continued.  Until these “distressed properties” are absorbed by the market at a faster pace than they are replaced in bank inventories, the percentage of “underwater” homeowners (those who owe more on their homes than they are worth) will continue to rise.  Most data seem to indicate that we did reach a "bottom" of the market, however, in 2012.

I defined “short sales” and “REO” properties in my February 2012 edition of my blog, and for those who do not really understand the general categories of distressed properties, I would suggest that you review that 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 created a real “buyers’ market,” and while I believe we reached a “market bottom” in the Charlotte area in 2012 (the point at which prices are as low as they are going) and can be expected to rebound in 2013, if the politicians can avoid sending us over the fiscal cliff and into another recession, that "buyers' market" persists.  Again; the downward pressure on property values is largely caused by a stream of distressed properties into the market.  When that subsides, as it appears to have been doing in late 2012, market conditions will begin to change.  But this will be gradual, as the economy in general remains weak.

 

In Part Two of this article, I will explore the opportunities that remain in 2012 and into 2013.  There are still many, for those to recognize them and are willing to act.   Distressed sales do not have to mean abject suffering, and identifying foreclosure and REO opportunities is more a matter of doing your homework than it is being privy to some "super-secret inside information."  It's really not that complicated, and as my motto goes: "solid research identifies great opportunities."