Inventory Of Bank Repo’s On The Rise
FHA LOANS, HOME LOANS, SHASTA COUNTY, TIPS FOR BUYERS, TIPS FOR SELLERS
December 21st, 2009
Shasta County has thus far absorbed the onslaught of bank foreclosed homes until just recently. I’ve tracked the number of REO’s (real estate owned), as they are called in real estate jargon, for the past year and the number of these avaiable homes has been relatively stable until Halloween. November marked the beginnining of a steady rise in the number of properties classified as REO’s. Today, 156 properties are listed as active (available) compared to most of the year when that number ranged from 110-120. That represents an increase of about 1/3rd!
First-time buyers and investors have been snapping up these properties soon after they hit the market. In some cases, bidding wars pushed the final selling price above the asking price! Buyers are attracted to these properties like flies to you know what believing they are capitalizing on someone’s loss. Low down or no down payment loans such as FHA and USDA have been used to leverage buyer’s limited cash resources to facilitate a purchase. Out-of-area buyers that largely fueled the run-up in real estate prices during the boom are all but gone. Today’s market is dominated by local Shasta County residents taking advantage of low prices and interest rates.
I wonder though if we have hit a saturation point looking at this significant uptick in available REO inventory. Speculation that banks are sitting on more than a million foreclosed homes could explain this increase. Perhaps banks are lowering the flood gates allowing more foreclosed inventory to hit the market. Banks must closely monitor the impact of listing REO’s for sale as a flood of distressed priced homes in one geographic area will only undermine values of other homes which these same banks hold loans on in these neighborhoods.
Shasta County’s higher than average unemployment rate only exacerbates the problem. Lenders aren’t approving loans for all but the most creditworthy borrowers. Additionally, prospective buyers must have stable and verifiable income to be granted loan approval. There’s talk of upping down payment requirements for the very popular FHA loan program from 3.5% to 5%. Credit score thresholds have been raised a couple of times this year by Fannie Mae to the point those with credit scores below 650 may not qualify for any loan. A local mortgage broker told me this will have a major impact locally where, according to him, the avearge credit scores of borrowers he sees is just over 600.
Indications are 2010 will be another challenging year for all who work in the housing sector. Real estate agents, lenders, appraisers, escrow officers, home inspectors and contractors need to plan for another rough year as our nation nurses the hangover caused by lax oversight of the lending industry.
Many parts of California and the nation are reporting increases in home prices. Don’t expect that to happen here in the Redding/ Shasta County area until foreclosure activity subsides and REO listing inventory decreases to double-digit levels. I predict this will not happen here until 2011-at the earliest!
530-224-6767 or 530-941-7492
BRAD GARBUTT
RELTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS REAL LIVING
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL SALES EXPERIENCE
