* So What Would A Foreclosure Freeze Mean To Durham Homeowners?
Wednesday, October 13th, 2010
If you have followed the real estate news at all this past week, you know that the foreclosure process is in turmoil. Bank of America revealed earlier in the week that its employees were notarizing foreclosure documents without reviewing them. Bank of America has suspended foreclosures nationwide. Several other national mortgage lenders, including JP Morgan Chase and GMAC Financial, have suspended foreclosures in selected states. Here’s a decent overview of the situation as of this afternoon from USA Today;
Administration Declines to Halt All Foreclosures
[As an aside, North Carolina is one of the "23 states that require court approval" for foreclosures]
Experts have disagreed about how serious this issue may become, but it is clear that several major mortgage lenders will not be processing foreclosures for at least the next couple of months. Let’s go with that — significantly all major mortgage lenders decide to halt foreclosures through the end of the year. How will this effect the Durham housing market? And what should homeowners do about it?
The answer lies in that demon of Econ 101 – the supply and demand curve. If banks stop processing foreclosures, the supply of bank-owned homes will decline. This may not happen immediately, as there is some processing time, but you would see it 6 to 8 weeks down the road. [Important caveat: If lenders start pulling properties off the market, which has not happened locally yet, this effect will be seen quicker] With demand remaining constant and supply declining, we should see some support in home values. this might be seen in improving prices, quicker sales or both starting in the first months of 2011.
So in the short term, this is good news, but what happens when all this is over? Banks are going to make up for lost time and the supply of bank-owned property is going to increase. So the exact opposite effect happens — supply goes up so prices will fall. In many ways, this will be the same as when the tax credit expired – a short term boost paid for with slower sales down the road.
Want some specific advice?
- If you are a homeowner in trouble or facing foreclosure, you have more options available to you. Depending on who holds your mortgage, you might have several extra months to stay in your home. Hopefully, banks will also be more willing to accept a short sale, as that will be one less home they need to foreclose on. If you list your home now, you might be able to sell it before the foreclosure suspension ends.
- If you are a home buyer, you want to move quickly to find a new home and get it under contract before the “new reality” pushes prices higher. You can negotiate for an extended closing date, but you should consider having a home under contract by Thanksgiving, especially if you are looking for the “sweet foreclosure deal.”
- If you are even thinking about selling your home in the next year, you should be prepared to list your home ASAP. There will be a small window of opportunity where a home that is priced right can sell before that wave of bank-owned properties pushes prices back down. List it today, price it to sell by Thanksgiving, and you might be very happy with the results.
Like any change, this could be a great opportunity if one is prepared to take advantage of it. If you are interested in taking advantage of upcoming opportunities, please email me and we’ll get started.
[Image credit: Jeff Turner via flickr]
October in the Triangle means many things — temperatures start to come down, leaves start to turn and Christmas decorations start to come out in local stores. October also means it’s time for the Parkwood Volunteer Fire Department Barbeque. The 31st Annual Barbeque will be this Saturday, October 9 from noon until 7PM. After 30 years of practice, the firemen have this down to a science with good BBQ and speedy service. Plates are $7 each [$4 for children] and can either be eaten at the station or taken elsewhere. If you do stay at the station, several pieces of fire and rescue equipment will be available for display and touring.
