Riverside Seller's Market | Riverside Real Estate | Orangecrest Home Prices
2013 expected to be Year of the Short Sale
Despite a historical lack of homes for sale, short sales this year should eclipse the number completed in 2012.
That’s comes from Daren Blomquist, vice president of RealtyTrac, which charts real estate activity across the country.
In an interview with Default Servicing News, Blomquist said short sales should exceed 1 million in 2012, driven by a variety of factors. And foreclosures should reach about 600,000 in 2013, based on 1.2 million default notices filed in 2012.
Some neighborhoods in the Inland Empire are down to about one-fifth the inventory expected in a “normal” real estate market. Based on the number of properties sold in the past year, some areas have only a few weeks inventory available. That shortage – combined with low interest rates and high buyer demand from cash-toting investors and first-time buyers – has decreased sales volume and increased prices.
Several factors have contributed to cut inventory and boost values:
Foreclosure Settlement: Last year, five major lenders settled with 49 states and the U.S. Dept. of Justice over improper foreclosures and agreed to pay $25 billion for loan modifications and other workout solutions for distressed homeowners. Later in the year, 14 lenders and servicers agreed to pay another $9.3 billion in exchange for an end to a federal Independent Foreclosure Review.
The lawsuits slowed the foreclosure process across the country, until the settlements set down specific guidelines to foreclose. Now the banks have a blueprint to go by, which could put foreclosure sales back on the fast track.
Homeowner Bill of Rights: This monumental California legislation requires, among other things, a specific process before a bank can foreclose on a delinquent homeowner. Though the laws kicked in Jan. 1, banks were already putting systems in place and that slowed the number of foreclosure sales.
The legislation slowed foreclosures and increased short sales. Now Washington, Oregon and Nevada are working on similar legislation.
Loan Mod Dreamers: In May 2012, Bank of America announced with great fanfare that it was sending principal-reduction letters to lucky homeowners as part of the DOJ settlement. Even though only a chosen few would actually qualify for a reduction in their loan amount, many homeowners who would have put their homes on the market for a short sale instead stayed on the sidelines hoping for their own “golden ticket.”
Servicers have now disbursed more than $46 billion in homeowner assistance, far surpassing the totals they agreed to. Widespread principal reductions are unlikely.
Distressed homeowners who were waiting for their bank to cut their mortgage balance will face reality in 2013 and likely put their homes on the market as short sales.
Demand: Historically low interest rates, low home prices, rising rents and Wall Street money have all contributed to massive demand and little inventory. Hedge funds who perceive strong returns on their investment have flooded the market with cash offers in what could be considered a feeding frenzy.
And home sellers have been reaping the benefits, especially in the Riverside and San Bernardino counties, where prices have increased more than 20 percent the past year.
Blomquist said any increase in inventory – even from foreclosure – would be a welcome addition to the real estate market.
Because of “the severe lack of inventory available for sale, foreclosures could actually fill that inventory and provide more fuel to the fire that’s been slowly building over the past year as more sales occur,” Blomquist said in the interview.
He also downplayed the effect of the feared “shadow inventory” of homes (those at least 61 days delinquent on mortgages or already owned by banks but not yet on the market). Some estimates put the shadow inventory at about 2.5 million, which is down 20 percent from a year ago.
“This so-called shadow inventory never hit full force, so now I think we’re at a point where the pendulum has swung completely the other way and the housing market needs more inventory,” Blomquist said. “So 2013 would be a serendipitous time for banks to release that inventory.”
Until then, the seller’s market is here. But it is still unsteady, like a three-legged stool. Without a fourth leg – stable job growth – the housing market could again collapse if interest rates rise or the economy hits another bump. And that could mean a longer recovery … and more short sales.
Want to know what your home is worth and whether you can take advantage of today’s higher prices? Call us today at 951-778-7900 to set up a 10-minute consultation.
(Brian Bean is a Home Listing Specialists and owner of Dream Big Real Estate in Riverside, California. He can be reached directly at Info@DreamBigRealEstate.com or 951-778-9700.)