The Illusive Foreclosure Tidal Wave and What It Means for Your Real Estate Investment
For several consecutive months there has been a lot of positive news about the state of the U.S. housing market. While there are undeniable signs of growth and the outlook is generally positive, there are still over 1 million houses in foreclosure. In October 2012 the number slimmed to 1.3 million homes in foreclosure, but the number is still extremely high.
Completed foreclosures were down 17% from October 2012, at only 58,000. While this number is comforting given the peak rates of foreclosure in 2008 and 2009, it is still troubling to consider that 1.3 million homes equates to 3.2 percent of all homes with a mortgage- only a small percentage less than the 3.6 percent of all homes in October of 2011.
The downward trend is a great sign for our recovering economy, but it means that investors looking for a great bargain may want to act quickly if they intend to find a great deal. Foreclosed homes often sell for a song, making them an attractive option for someone who wants to pad their IRA with a real estate investment. If buying a foreclosed property doesn’t attract you, it doesn’t matter: a depressed housing market generally equates to lower property values in general, making it less expensive to acquire prime real estate. The downward trend in foreclosure inventory is a signal that this depressed market is on the upswing.
But the upswing may be temporary. We’ve all been warned about the predicted foreclosure tidal wave. The huge mortgage providers, including Bank of America, JP Morgan Chase, Citigroup and a handful of others, paid a $25 billion settlement when they were accused of illegal foreclosure practices. These providers therefore have had to come into line with new servicing standards and pursue alternatives to foreclosure, including refinancing and short sales. New laws in many states, including California, have also made it more difficult to foreclose. Therefore, as banks struggle to meet new standards for foreclosure, there has been a huge predicted backlog of foreclosures that, as it is predicted, will be disastrous when they hit the market. Some data seems to support this. For instance, the average number of days a mortgage is in foreclosure can be up to 900 in New Jersey, according to RealtyTrac. Other states have seen longer wait times. Some people predict that the drop in foreclosure inventories is just the precursor to such a phenomenon.
However, most specialists and experts are saying no such tidal wave will occur because the current mortgage system can barely handle the current influx of foreclosures, much less any more. Prior to 2008, foreclosures were at about three times less than the current level, and it will still take a few more years, with the recovery of jobs numbers, to reach pre-2008 levels.
While we aren’t yet seeing the predicted tidal wave of foreclosures, the foreclosure crisis is clearly far from over. However, that doesn’t mean that the market will be optimum for real estate investing forever!
Call iPlanGroup today at 855.604.7526 to set up your Real Estate IRA.