Foreclosures No Longer Threat to U.S. Real Estate Market?
Some real estate agents are proclaiming that foreclosures are no longer a threat to the U.S. housing market, but is this really true and what does it mean for those wholesaling homes?
We’ve seen many attempts and plans said to be aimed at helping homeowners and stemming the flow of foreclosures during the last couple of years but even as many of these are expiring in coming weeks, foreclosures and mortgage defaults continue to surge in many parts of the country.
REO inventory may be down but the northeast has only really recently begun to feel the foreclosure hit and Florida remains mired in new filings with one in every 304 homes in foreclosure in November 2012. In fact, FL which many had pitched as the front line of the new real estate recovery has seen foreclosures sales spiking by almost 50% during the 3rd quarter of 2012 and foreclosure related sales making up over 32% of all real estate transactions in Miami, which was proclaimed the epicenter of a turnaround.
So whether this really means predictions about the South Florida market were just wrong or the Sunshine State is slipping back into the hole isn’t 100% clear. However, the real reason that Realtors in areas like this are claiming foreclosures are not a threat (besides wanting to drum up more business) is that they feel properties are selling so quickly, foreclosures aren’t weighing down the market.
Of course many, including real estate investors, wholesaling foreclosures may not be fully aware of just how many defaulting loans and distressed properties are out there. There are definitely still millions of them worth hundreds of billions of dollars.
However, much of the distressed inventory and bad loans out there are being disguised or hidden by banks in order to make numbers look better. This includes unloading tens of thousands of bad loans, keeping REOs off the market, pushing short sales through early to avoid the foreclosure stigma, and even holding off on filing massive numbers of default notices, despite borrowers being months behind on payments.
So for those wholesaling foreclosures, there is still definitely no shortage of distressed properties to pick from coming anytime soon. Providing buying momentum keeps up, there should be no reason to fear a negative impact from the current flow of distressed properties either. However, it is crystal clear that real estate investors, especially those wholesaling foreclosures as well as rehabbers, are essential for healing the market and pushing the recovery through.
So those concerned about having enough inventory to keep up their investment volume should be comforted by the fact that there are literally years of foreclosures left. However, it is just as important to recognize that even when they dry out, there is little risk of running out of deals. Even at the peak of the market there are always opportunities if you have the right strategy, buy right and have buyers lined up.
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