- 2% of all homes in America are in some part of the foreclosure process. So if you live in a typically sized neighborhood of 300 homes, 6 are in trouble with the bank. Historically there are always 1% to 1.25% of homes in foreclosure. The news is correct when they say there is a 75% to 100% rise in foreclosures but on a pure numbers basis 98% of all Americans are up to date on their mortgage payments.
- This is not to ignore the pockets and sub-markets around the country that are getting annihilated by foreclosures. For Atlanta, that market is on the south side and in lower-income areas where the sub-prime lenders feasted on uneducated buyers. They put them into loans they didn't understand with no money down. Of course they walked when things got bad. They had no money to lose and the credit was already bad - that's why they need sub-prime loans in the first place!
- There is this idea that with all the foreclosures a buyer can go down the street and pick up a house 50% off. Wrong. First you must understand the process then understand the people that control the process. Both of those are topics for another day but in short the process is long, 6 to 9 months in a normal market, but is very long now, sometimes over a year because of the massive amount of numbers the banks are dealing with. Remember most of these loans are held by secondary companies that purchased these as investments. They are not staffed to sell hundreds of foreclosures. Think of the pain you go through with your local bank to get basic service. Now put that "service" representative in a cubicle and in charge of selling hundreds of homes around the country in markets they have never heard of! No wonder there is a huge bottle neck in the market.
- Less than 25% of foreclosures are below market price when the hit the market bank-owned. Now 50% may sell below market value but only over an extended period of time and patience from the buyer. It is not to say you cannot find a deal, you just have to look hard and be willing to wait.
There is so much more to this topic that I haven't even scratched the surface. Hope you find this helpful and somewhat interesting!
2 comments:
How long do you think it will take to shake out in the Atlanta market?
That's kind of hard to say because the information the public gets is a lagging indicator. We find out a house is in foreclosure when it is bought off of the court house steps by the bank. That process is so backed up right now that it can take months for that to occur and then several more months before they are able to get it on the market. With that in mind, we don't really know how many homeowners are behind in payments and potential foreclosures. It could 1,000 or 10,000. We just don't know.
Personally I feel our market will rebound some time in the middle of 2009 barring any major economic or political setbacks. I'm basing that on 3 factors that make Atlanta unique to most markets.
1. Pricing. Atlanta did not take part in the great housing bubble in terms of pricing so their is not much air to take out on the pricing side. If you need to sell and you have owned your home for at least 3 or 4 years you should have made some equity. That is not true in every sub market in Atlanta but for the most part it is true.
2. Jobs. Atlanta's employment has remained steady dispite rising unemployment this year. I beleive it is up to 5.3% and below the national average but if you remove construction, real estate, and mortgage positions unemployment is in the 3% range. That what drives the Atlanta market. In-town service professionals.
3. Organic growth. Atlanta is the #1 destination for college grads on the entire east coast. Regardless of recession and economic slow down, kids are still graduating from college. They might not get the job of their dreams or the big fat salary but they're more likely to get it here than Charlotte, Birmingham, central Florida and other markets in the Southeast which had been growing. Those individuals who have worked for a few years and have saved some cash with good credit are getting great deals on in-town homes/condos and keeping the market afloat.
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