From yesterday’s comment section, regarding BofA quadrupling their NODs locally last month:
JtR, are you kidding?
Everyone knows foreclosures tank home values!
Hang with me.
Let’s say they are serious, and it ends up being a race to the exits between several banks. They start denying short sales, and go straight to foreclosure, which only takes 111 days, start-to-finish.
If they time it right, they’ll have a virtually-dry market the day after the Super Bowl, February 6th – and begin the flood of REO listings. But a “flood” would only need to be an initial 100 or so for the whole county, and then 50-100 per week after that for 3-4 months, to get the buzz going.
For a county that closed 2,929 detached and attached sales in March, 2011, an influx of 400-500 reasonably-priced REO listings in February wouldn’t tip over the boat – instead it would get everyone attention.
1. The mooches with big egos would be grabbing everything in sight, just so they can tell their friends and family that they got their piece of the All-American Foreclosure Bust of All-Time.
2. The first-timers, previously trounced in bidding wars over the last couple of years, would be plunking down their 3.5% and FHA-finance whatever was leftover.
3. Those who have waited patiently due to the persistent government gimmickry, can finally breathe a sigh of relief knowing their path was prudent. Those who are older, knowing the clock/calendar was ticking, would give themselves permission to proceed.
Because the initial “flood” of REOs was priced slightly under retail, and were vacant and ready to close, they would be well-received. In the beginning, the banks would be afraid of pushing too many out, but would find that the more they release, the more they get gobbled up – because the frenzy would be on to get a bank deal at all-time low rates. The stock market would be a mess due to Europe imploding, and political campaigning would be in full swing – promising the moon.
I’ll give you two historical moments to use as comparisons.
1. In April 2008 when I first became an REO listing agent for BofA, they were dumping the subprime-loan properties at full speed in Oceanside. As fast as we could list them, they were flying off the shelf in frenzied bidding wars like I never saw in 2003-2004. Sure they were cheap, but they were ugly – but they all sold for retail-plus. Today, Oceanside is one of the hottest markets in the county, and prices are up at least 10% to 20% from 2008-2009. Think if they did that in higher-quality neighborhoods where more owner-occupants would join in?
2. In 2003 we saw how this county can get whipped up in a frenzy. Nobody cared about price, the only thing that mattered was buying something, anything. If a frenzy broke out to half of what it was then, it would still be powerful and take on a life of its own.
This county is crazy about real estate, and with prices at 30% off and all-time low rates, the pent-up demand would finally appear.
I know the first dig will be about jobs, jobs, jobs. But the segment of the total population that would be buying is less than 5% of the total. There are plenty of buyers left, and we only need about 200 per month in NSDCC.
You heard it here first.