Well folks, I am going to say this, loud and clear….
NO I DO NOT THINK THERE IS A HUGE INVENTORY OF FORECLOSURES COMING. NOT IN OUR AREA.
“But Vicky,” you say, “I heard it from a little birdie that knows a lot of stuff. The foreclosures are there. The banks are holding them.”
So I ask, “How does your little birdie know?” And you don’t know that because you didn’t ask. Or maybe he told you that he heard it from another birdie, maybe an owl who is thought to be quite wise.
“OK, fine,” I say… but then I drive down the streets and I do not see vacant properties sitting there. I did,back in 2007-2009. A lot of them. We all did. You could tell from the street that they were vacant and neglected.
You think. You remember. You know that’s a good point. Then you think some more, and you start checking around. Then you find something and say “Vicky, read this article. It says it’s going to take 46 months to clear the inventory. Check out the statistics. The guys at the S&P know much more than you. That’s what I was talking about – That’s what my little birdie was talking about.”
Hmm… Yes, I read the article… and others like them. Did you read more than the headline? Did your little birdie? Remember, headlines are for shock value. But most people do not read beyond the headline. Nor do they study the market analytically or objectively.
So, please, read the whole article, and when you do, keep some things in mind…
1. The article is speaking nationally. And, just like the commercials the National Association of REALTORS puts out on your TV every day, real estate is local. If you are buying stock in a national real estate company then the national scene is important. And no, we’re not completely immune to the problems of the nation, but we certainly are insulated. “How is that?” you wonder… When the economy suffers, the government has to spend money. When the government spends money 1/3 of every dollar they spend goes into the Washington DC Metropolitan area. It’s why our economy does so well when others don’t.
2. The data in the article is based on the number of loans that are defaulting or showing signs of default. THESE ARE NOT CERTAIN FORECLOSURES. THEY AREN’T. Just look at the number of short sales that are successful. Most short sales used to be on that list….but they aren’t anymore – just click this link to see an article on how short sales are saving our market.
3. The experts are estimating the longest “time to clear” in “Judicial” states. This means states where the lender must go before a judge to get the right to foreclose. This can drag out, delaying financial recovery in those areas (Click the link to see the story). VIRGINIA IS NOT A JUDICIAL STATE. This means – and I want you to pay attention – Virginia is one of the states with the shortest “time to clear”. Click the link… you’ll see that Virginia and the Washington DC area are among the areas with the most significant decrease in foreclosure activity.
4. For purposes of the article, they are assuming real estate prices aren’t increasing. I won’t speak to the national scene, because I don’t study it like I study the local scene. But here, we are seeing incremental increases in prices (just check the stats on this page)… An increase in sales price + owners who have been working to pay down a mortgage = sellers who can sell without owing, without doing a short sale and without defaulting. And yes, I personally know of sellers who have just eeked out a “conventional” (non-short sale) sale thanks to that combination, and I am certain there are many more just like them.
5. The experts are also assuming MORE people will default on their loans. I do not pretend to have a crystal ball. But, at least in our area, consider these facts:
- According to Corelogic, in the 4th quarter of 2011 (more recent data is not available yet) only about 15% of the properties in Virginia are over-mortgaged. So 85% of the property in Virginia is actually in a positive equity situation. Those people surely aren’t defaulting.
- Local employment rates are increasing.
- People in other areas leave their homes vacant and come here for work….the opposite does not happen nearly as often. So, if they are defaulting, they are going to default on the house they can’t sell… there, not here.
- Housing is in demand in our area; resulting from that increase in local employment and resulting in that increase in housing prices that I mentioned.
So, no, I do not think our area will see a lot of new defaults. You can believe me, or not. But, my VERY FIRST BLOG POST EVER “Can You Hear The Whispers” in June of 2008 was prompted by what I felt was the beginning of a change in the market place. Compare those thoughts with the statistics for that same time point (note these stats were not available to me when I wrote the post). Maybe you think I am a little smarter now?
Lastly, consider that MRIS just reported that the number of distress sales (this is short sales + foreclosures) are plummeting in the Washington DC Metro area; and check out this chart created from the raw MLS data showing the last 5 years worth of sales in Northern Virginia: The brown line indicates “Non Bank Mediated” sales (not distress sales), the pink is foreclosures and the red is short sales. See how the number of distress sales in No Va are decreasing? In April 2009, distress sales accounted for 34% of the total sales reported in the local MLS; in April 2012, it’s down to 18%, and it’s not a sharp sudden decline, it’s been slow and steady – the kind of change that means it’s here to stay, in my opinion.
You know, the blog is the equivalent to the “soap box” of yesteryear. And I know tonight I am ranting just a bit. But I hear people recirculating and regurgitating partial, outdated, misunderstood half truths so often that I feel the desperate need to do what I can to set them straight…. and I whisper a lot less than I used to back in 2008.
So, thanks for reading. Thanks for staying tuned. And, know that I don’t spin facts… I am trying to get the best information into your hands all the time so you can make the very best decisions for your family every day..You can always read the latest on my blog “The Real Estate Whisperer“
Remember, with me, you’ve got a friend in the business!
Vicky Chrisner, Real Estate Whisperer (or shouter)