Norada Real Estate Investments

Bottom Dwellers Waiting to Pounce

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The Wall Street Journal and The New York Times both published articles in the past six weeks stating that the housing market has reached a bottom.  But hold on for just a minute… It seems that not everyone believes it.

Even Yale professor Robert Shiller, co-founder of the S&P/Case-Shiller Home Price Index, admits to being a little bit skeptical.  In fact, he even told Fox Business last week that he's not entirely convinced that a bottom has been reached yet.

“It’s possible, but I’m not confident. This is partly seasonal,” Shiller said regarding the recent rise in home prices that have been documented over the past few months.

Only one thing is certain when it comes to economics: there is no certainty as to when an economic cycle has bottomed out until it’s already past.  This is especially true in real estate — one of the biggest driving forces behind our national economy.

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Freddie Mac Needs 15 Years to Unload All REO Inventory

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Sales of Freddie Mac REO homes took a dip in 3Q11 compared to the first two quarters of the year as nonperforming loans surged consistently over the previous quarter.

The number of repossessed homes plunged to 25,300, falling by 13.5% quarter-on-quarter (q-o-q) or approximately 30,000 units in 3Q11. REO sales also stumbled from 31,600 in 1Q11, the highest number recorded in the government sponsored enterprise’s (GSE) history.

In 3Q11, Freddie Mac thrust back 24,300 homes into its current inventory while disposing 25,300 REO properties at the same time. At the end of the quarter, the mortgage capital provider has already accumulated 60,000 REO properties on its books, down by 25 percent year-on-year (y-o-y) as a result of newly completed foreclosures.

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Mortgage Delinquencies Decline Across the U.S.

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According to a recent survey released by the Mortgage Bankers Association (MBA), the “latest delinquency numbers represent significant, across-the-board decreases in mortgage delinquency rates in the U.S.,” according to MBA’s chief economist, Jay Brinkmann[1]. In fact, total delinquencies (not including homes already in foreclosure) are at the lowest levels since the end of 2008, and mortgages with one payment past due alone are at their lowest level since 2007, which MBA marks as the “very beginning of the recession.”

Perhaps even more more promising: at the beginning of 2010 90-day-or-more delinquencies were at an all time high at the beginning of 2010 but have now fallen 28 percent, and 48 of the 50 states experienced a drop in this area.

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Foreclosure Timeline

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Novice short sale and other real estate investors are often confused by the entire process; it's not your fault! Foreclosure has never been simple but with the current backlog and other pressures, it's become worse than ever.

Here to help is an easy to read foreclosure process timeline. It will help novice investors understand the different methods used to purchase short sale, pre-foreclosures and foreclosed properties.

  1. First month missed payment. This counts as day one for the bank but notice, the homeowner had 30 days just like normal to come up with a payment. They will always remain 30 days ahead of the bank schedule.

  2. Second missed mortgage payment…day 30 for the bank.

  3. Third missed mortgage payment…day 60 for the bank. The loan is now seriously delinquent.

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Short Sales: Fact vs. Fiction

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Looking for big profits in short sales? An internet search for the phrase “investing in short sales” brings up tens of thousands of hits, many of which offer strategies and tricks to make a killing on the rising number of short sales in the U.S. These properties are sometimes viewed as easy money because the seller is in distress. But this is not necessarily the case.

The concept behind a short sale is this: a homeowner is unable to continue making mortgage payments; however, the outstanding mortgage on the property is higher than the market value of the house (i.e. “upside-down”). The homeowner makes a deal with the lender to sell the property at market value, and the lender eats the loss.

But are short sales really the money-making scheme that many believe them to be?

Not that it’s impossible to get good deals – many investors manage to buy short sales at a discount – but investors should be aware that negotiating a short sale is no walk in the park.

“Our biggest challenge [with short sales] is getting the banks to recognize that the property is not worth what they think it is. When we submit offers, and we think it’s a fair offer, and we fight with the banks on behalf of…the buyer, it’s very difficult to get them to meet us halfway at times,” says Mia Lutz, president of Say No To The Bank, a community counseling organization that works with foreclosure buyers and sellers.

Time frame can also be a major impediment for looking to purchase short sale properties. Short sales can take anywhere from 30 days to six months from contract to closing, and the deal can fall apart at any time.

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Norada Real Estate Investments 30251 Golden Lantern, Suite E-261 Laguna Niguel, CA 92677

(949) 218-6668
(800) 611-3060
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