In my city, the rate of foreclosures is rapidly going up and exceeding previous years marks. However the asking prices haven’t really gone down on residential yet.
Are these the steps to the market ultimately falling hard?
Foreclosures keep getting swallowed up by investors prior to hitting a foreclosure sale. (Until a point where they’ve bought enough and or start to question the market.
Then an increasing number of foreclosures will go through a foreclosure sale but don’t get bids since the bank won’t accept less than the debt owed.
They then appear on MLS for near list price.
After sitting on the market for near list, the banks ultimately start dropping the price until they are purchased.
Other homes in the area suffer because of the continually lowering cost of the high amount of forecosures.
Make sense, or is there an ongoing mix of all of this occuring simultaneously?
Foreclosure houses are not really in competition with retail houses because a retail house is generally move in ready. A foreclosure needs rehab. People are not going to pay retail for a fixer upper. (In my town)
The recent rise of foreclosures is probably due, in part, to the record number of adjustable rate mortgages that were written about 5 years ago at 40 year record low rates.
These ARM’s are now becoming due with “exploding” balloon payments, or their interest rates are being re-adjusted to present day higher rates.
When you also add in the increase in local taxes, some people are seeing their monthly payments double, forcing them to move-out(foreclose), or settle for interest-only loans.
Others think they are being lucky by re-financing into another ARM.
My question is what would be the biggest factor(s) in creating a declining market?
Will the majority of the deals be purchased at foreclosure auctions, or will most go through the foreclosure and become a bank owned listed property on the MLS?
I doubt if all of these possible foreclosures will get closed on by investors prior to going through foreclosure, in my opinion my guess is less than maybe 3% will get bought by investors.