2:30pm | A report released on Thursday shows six in 10 people would not walk away from their mortgage, no matter of how far underwater they are, a drop in consumers’ willingness to buy foreclosed properties, and most importantly, an end in sight to the foreclosure problem weighing on the market sometime in the next year.
The authors of the survey, Trulia.com and RealtyTrac, stated that while the housing market will take a few years to make a complete recovery, foreclosures in the U.S. will bottom out in 2011.
“New delinquencies are beginning to slow down, and that’s probably the fist positive sign we’ve seen in the housing market for a number of years,” Rick Sharga, senior vice president of RealtyTrac said during a conference call on Thursday. “There’s an enormous backlog of delinquent loans, but lenders appear to be managing inventory that’s available on the market by slowing down the initiation of new foreclosure actions. We’re seeing loans stay in delinquency longer and longer.”
According to Sharga, and average of 100,000 default notices are issued nationwide each month. “If you take the estimated 5.5 million properties going into foreclosure, that comes about to about a 55-month inventory, but it probably won’t take that long to go through this. We are projecting that 2011 will probably be the peak year in terms of overall foreclosure activity.”
That’s his good news. Sharga’s bad news: “We don’t except to see any healthy growth in home prices on a national level for the next couple of years. We’re looking at a long, slow, relatively flat recovery that probably won’t feel much better until about 2013.” But, he added, “We also don’t seen an enormous amount of downside risk in home prices right now.”
Belmont Shore-based Realtor Jeremy Colonna said he’s not surprised by the findings in the survey. “I have several clients that have not made mortgage payments in many months without having had their lenders file notices of default. The reason for this is simple. When a bank files an NOD, they are required to remove the loan from their asset column. I have two clients owing Chase over $3 million who haven’t made payments in over a year without any filings. Just those two loans represent about .1% of the entire profit reported by Chase for the first quarter of 2010. It doesn’t seem like that much, but if you were to extrapolate those kinds of numbers nationwide it gets really scary. Multiply my situation by even just 100 agents, and that would knock their stock price down by $1.10 per share. I got news for you, there are more than just one hundred of us.”
Barely one in 100 homeowners say “walking away” would be their top choice if unable to pay their mortgage, and they were to go “underwater,” 59% would not consider walking away no matter how much their mortgage was underwater, the survey shows.
Additionally, the survey shows that 45% of U.S. adults are “at least somewhat likely to consider purchasing a foreclosed home in the future.” That’s down from the 55% of U.S. adults surveyed in 2009.
“The appearance that fewer buyers are willing to purchase foreclosed homes is likely due to more buyers opening their eyes and realizing that in the urban and suburban areas, most (real estate owned)’s sell for more than standard sales sell for,” said Richard Daskam, an agent with Keller Williams who conducts a high volume of transactions in and around Long Beach. “It’s still a buyer’s perception that they can get a better price for an REO than for standard sale. In reality, over the past year, we’ve seen multiple offers on REO’s and prices going up. “
Daskam continued: “Some agents still under-price short sales but most of them sell for ‘market value,’ whatever that is by the time it is finally approved. A year ago, we were seeing short sales being approved for more than the market because at that time prices were still going down and the banks’ values were based on the value 18 months ago. Now, prices are stabilizing and an offer made six months ago on a short sale is likely still within the market value today. For those agents that way under price short sales today, their buyers are in for a rude awakening. I do at least 100 price opinions a month for banks and the majority of the properties have had at least one other valuation done, some have had five to 10 done. The banks know what market value is and are countering short sale offers at market value. Gone are the ‘steals’ that short sales once were.”
Still, there are bargains to be had, Daskam noted. “The only place I’ve seen foreclosures go for under market is when investors buy them at the trustee’s sale on the county steps,” he said. “There are some really good deals there if a buyer has cash.”
According to Trulia.com CEO Pete Flint, the end of the Federal government’s second homebuyers tax credit triggered a surge in the market, but then consumer activity dropped off afterward. “I expect we’ll see some very high volatility as the housing market stats come out in the next coupla months,” Flint said, adding that “over the mid-term, we see no meaningful appreciation or depreciation. I believe the worst is certainly behind us.”
Realtor Helen Najar, with RE/Max College Park, holds a positive outlook for the Long Beach area.
“I think it’s going to be a good opportunity for buyers and for sellers,” she said of the housing climate in the Long beach area market over the next year. “I think we have a fairly stable market right now. If the banks dump (the backlog of foreclosures) all at one time, we’re all in trouble. But if they open the tap at a steady stream, I think that would be alright. I don’t think we’re going to have that many foreclosures in Long Beach. Short sales are being sold. I think our market is going to be in the short sale market, I don’t think it’s going to be in the foreclosure market.”
The survey was conducted online within the U.S. by Harris Interactive between May 10-12, among 2,596 U.S. adults aged 18 years and older.
Overall, despite some of the grim assessments scattered throughout the survey, the poll had some positive news for housing. However, Sharga cautioned: “We are not out of the woods yet by any stretch of the imagination. Overall foreclosure activity was up 16% year-over-year in the first quarter. The cycle is not over.”