Tom Ruff of the Information Market posted March’s foreclosure numbers recently, which caught my eye regarding the REO market in Maricopa County.
Let me explain. March had 8045 Notices posted which was a 6% increase over February. While that may sound like bad news remember March had 3 more ‘business’ days and the 2010 numbers were 25% below March 2009.
The number of ‘Canceled’ Foreclosures was 3747-the highest month ever. More Short Sales and Loan Mods? (Probably) The Canceled numbers were 7% higher than 2/10 and 15% higher than 3/9. Again starting to sound like good news.
The banks completed 5556 Trustee sales, also the highest month on record. This may be attributed to the longer month and/or the end of a quarter. With the completed sales and the canceled sales, the month showed a 1314 drop in “Bank Owned” properties-the current Shadow Inventory. In fact the number of Bank Owned dropped 2634 for the quarter, the first drop for a quarter since Q1 2006. Wow some might be starting to think the ship is turning.
I did some personal study of the 16,342 current ‘Bank Owned’ properties. I found 4970 active in ARMLS; 384 AWC; 4524 Pending; and 203 Closed so far in April. That’s approximately 10,000 of the 16,000. Are the Bank Owned-but not on the market numbers growing? It appears so-Is that bad? Probably not. Remember the Fannie Mae program of ‘rent backs’ after foreclosure? Wouldn’t that lead to more ‘Bank Owned’ but not on the market?
Again thanks to Tom for his counting, reporting and explaining. It certainly helps to make some sense of what’s happening in today’s greater Metropolitan Phoenix market.
Ghost and phantom inventory. This is not new news. You can see it when you drive right after sunset thru neighborhoods. You will see hardly any lights on in the houses. Then during the day time you will see hardly any for sale signs in the same neighborhoods. We will see basically an OPEC of real estate, as I had wrote a long time ago about. This is a good thing, and a bad thing. It is good because they will prevent the values of homes from going down any further by controlling the supply of homes for sale at any given time. This will cause the housing prices to increase, which is a bad thing for people maturing into buyers. It will also be a bad thing, because it will cause less appreciation, because once that magical number is hit they will dump XYZ homes on the market causing the market to stop its run up. These release points will cause some levels of panic to hit the market, because the average realtor or person will not know when OPEC is releasing the inventory. They will feel it and maybe panic. The banks have shown us they know very little, so I am very worried about these next moves. They perhaps used lessor qualified realtors who had time to run around and do BPOs to become their REO agents vs seeking out players like Russell Shaw, Mike Mendoza, Those Callaways, Curtis Johnson, The Ryan Team, and on and on. I really feel if they would have reached out to the leads of the local markets that we would have seen a think tank going on, and less decline in values. Further if we would have seen any attempt by the banks to do loan mods or short sales we would be in a better place. Then going back in time further if they had a formula that worked with 0% down loans that looked at the 10 year local market average, and if we exceeded that average by 2% each percent above that the buyer would have to bring in the difference- if we appreciated at 5% for the 10 year average, and this year we appreciated at 8% then the buyer would have to bring 1% to the table, etc, which would slow the flood of buyers down, because if it was now at 12% the buyer would be delivering 5%, and on and on. There is nothing wrong with $0 down if it is managed, and you will start hearing there is nothing wrong with ARMS if they are managed. ARMS have not gone out of control this entire time- NEGAMs have, but those nasty loans are not just a simple ARM. The reason those deals go out of control is because the home owner is not even paying the interest only selection, and then it resets to a 30 year mortgage. We see a payment go from $400 a month to $1600 month as an example. I feel we have about 2 to 3 more years of the new normal until we return to prior to 2004 style of real estate. With that said we have seen a massive run up in technology lately, but my gut is telling that we will see 2004 marketing and advertising return, just like we will see 1970s clothing styles return. This means door knocking, flyers, postcards, farming hard, etc. I 100% stopped farming, because I knew what we were heading into, but knowing now what we are heading toward I am starting to head right back into old school farming- I hope to see some of you out there, because so many people got sandwiched in this last market by not seeing what are called OPEN spaces in the NBA like Nash can see. In our business I see them as open opportunities. I would not plan on seeing any real results for at least 12 months right now. You main thing is branding yourself in front of a future seller or buyer.