Wednesday, January 26, 2011

Regarding Mortgage Activity, Here' an Email from my Boots on the Ground


Real time data, it is absolutely dead.  Has been since the last time I updated you.  Very little activity in both the refinance and purchase market at this point (the realtors are perpetually positive and will tell you that people are out looking, but these buyers are very picky and may look at 50 homes before they decide to do anything).  Usually this time of year, we see the beginning of activity in the purchase market.  People start getting pre-approved so they can go out and look, but so far that activity has been very low.  It is my understanding that the existing home sales for last month included about 36-40% REO properties(many may have been cash purchase as well-investors looking to put renters into them…more downside pressure on values within neighborhoods).  That is going to put a lot of pressure on property values as private sales have to compete more and more with the flood of foreclosure homes.  There has been a slight jump in new constructions as those with money would rather build then buy someone’s problem or get what they want (value right now as builders have been cutting margin just to keep people employed and pay the bills).  In addition the market (buyers) overall is expecting a decrease in home values of 10-20%, so many may have decided to wait it out to see where the chips might fall.  The home buyer credit last year sucked a lot of buyers up a year that may have bought this year.  Credit requirements are getting tougher, appraisals are being highly scrutinized and rate adjustments for credit, down payment amount and so for are making loans more expensive then they have been even going back 6 months.   A bigger picture not being discussed…how long do the banks, title companies, attorney’s and peripheral business keep all these employee’s on staff for little or no business.  We could be talking about many, many layoffs in the future. 

By the way, what happens when 1 bank decides it needs to be the first to market with their entire portfolio of bank owned properties instead of the drip approach we have been seeing.  The other banks will come in as fast as they can with their portfolio so they don’t get left holding the bag.  What do you think will happen to the price of homes at that point?  Do we see the FED step in and start buying up assets (foreclosed homes) of the balance sheets of the banks?

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