Foreclosure To Some Is Investment To Others

According to the Boston Globe, recent foreclosure proceedings from lenders “approached historic highs.” Lenders started over 2800 foreclosure proceedings in July, as opposed to the 500 or so that were filed in June of 2009 and a year ago in July of 2008.

In Florida, where I sell real estate, the Miami Herald reports that 23 per cent, or almost 807,000 loans, were either past due or in foreclosure by June of this year. Unfortunately for Florida, we lead the nation in foreclosures in this category: 12% for us versus just over 4% for everyone else.

There is no end of foreclosures in sight in the near future. Because as home values decline, more people owe more than their homes are worth, so they just walk away from their homes.

However, sensing opportunity, investors and people with credit run toward those homes. The National Assoociation of Realtors tells us that existing home sales leaped 7.2% in July to a seasonally adjusted annual rate of 5.24 million. This was the largest monthly increase since 1999. This also makes 4 months in a row that homes sales have increased. And sales last month were 5% higher than they were a year ago,

This increase is very good news for the housing market, because it removes excess inventory. As excess inventory disappears, downward price pressure eases. So, while home prices are not yet going up, they are no longer dropping at double digit rates. Investment in real estate is once again in force.

Foreclosures are usually sold under market value. Investors come in, flip the properties for a small (or large) differential and start again. First time homebuyers respond to falling prices by buying homes they can afford comfortably. Eventually, supply and demand will meet and prices will stabilize. This is not likely to happen soon, but signs of a real estate recovery are in the air.

CNN Money says that homes have fallen more than 32% from prices during the peaks of 2006. Also, mortgage rates have dropped to their lowest in 20 years. This news continues to encourage people to search for these lower cost properties, and this still signals a buyer’s market.

A trend that is very interesting to note, and that points slowly to signs of recovery, is that investors have cleared out most of the foreclosed and lower priced homes in markets such as Phoenix, Orlando, Las Vegas and San Diego. Only recently, these markets were glutted with excess inventory because of the alarming foreclosures rates.

While foreclosures may be rising on a national basis, investors are moving into areas that people want to live in and are buying up properties rapidly. First time buyers are also helping to remove these lower costs homes from the marketplace.

While foreclosures will remain an unfortunate fact of life for the foreseeable future, investors and first time buyers who are able to act quickly will purchase them and end up financially ahead.

Marc Jablon, Realty Associates
marcjablon@yahoo.com 561 / 213 – 6139

www.MarcJablonHomes.com