Hot market: Under $300K for foreclosed houses

Worth reading: This story just posted on LATimes.com about the market for foreclosed houses, which includes the following nuggets/insights/claims:

"REO homes (bank shorthand for "real estate owned") that are in good condition and listed at $300,000 or less are drawing as many as 15 to 20 bids from home buyers and investors looking for bargains, area real estate agents report," Dinah Eng reports.

--"Right now, anything under $300,000 is a hot price," according to Century 21 Wright G.M. Earl Bonawitz, who is based in Temecula.

--"A $650,000 to $700,000 appraisal a year ago in some areas is now worth about $350,000," Bonawitz said. If you are scoring at home, that's a discount from previous appraised price of up to 50%.

--"Prices are more realistic. Time on the market is coming down. I've seen bank-owned properties sold within five days recently, compared to an average of 95 days for REOs at the first of the year." -- Stephen Yeager, president and chief executive of Weichert, Realtors-Foothill Properties in the Inland Empire.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: L.A. Times

Comments

[150 multiple choice questions]

Without question the mortgage brokers, especially the independents, were a huge part of everything that broke, but the realtors were standing right there saying how "you better get in now" and "you can't lose money in real estate," etc, etc. There's PLENTY of blame to go around, and I put much of it on the buyers - because even though it's work, it's not that much work to educate yourself and make your own decisions.

But the most frustrating thing is you go to an open house still today and you'll be lied to by a realtor. Early and often and without reservation or fear of penalty. Then you'll be given bad/misleading/cherry-picked data... and this should change.

[Brad Neal]

150 multiple questions: OK I was a bit harsh. I'm sorry. By the way, not a single condo sold in Venice last month. And not a single Seller reduced their price. Venice is an anomaly for sure.

[sheila]

It seems to me like the "money quote" was once again ignored in the blog summary of the article, unless everyone now wants to slam DataQuick as being lying, corrupt enablers or whatever the latest phrasing is around here:

John Karevoll, an analyst with DataQuick Information Systems, also is seeing that REO prices have come down and more homes are closing escrow than a few months ago.

"The big question is whether we're in a recession," he said. "If we are, we're in for some more downturn. If we're not in a recession, it's likely that prices have found their bottom and that most of the declines are behind us. That's true for REOs and the market as a whole."

[Nick]

To amir, and sorta OT, but hopefully interesting:

While it's true that loan rates are related to long-term rates, they are more directly influenced (as far as I can tell) by the Fed rate, the long-term treasury rate, and inflation expectations. Let's look at each of those:

- The Fed will keep rates low as long as the economy is in recession and inflation appears under control. Since the government directly controls the CPI through hedoic regression, it can be made low forever. There is a huge amount of Alt-A loans, underwater "owners", and personal debt, and that should keep personal spending depressed for a while. Since personal spending is the bulk of our GDP, we will probably be in a recession for a while.

- The long-term treasury rate varies inversely with the price of long-term treasuries. That price varies inversely with the perceived long-term value of other fixed-rate investments (such as mortgage-backed securities and corporate debt instruments). So as MBS's and private bonds are seen as risky long-term investments (which they will be while the economy is in a recession), treasuries will be artificially highly valued, and thus have low rates.

- Inflation expectations are driven (currently) primarily by the CPI, which is freely and fraudulently manipulated by the government. As long as inflation is undesirable, the government will keep the CPI low; and until the news media gets more vocal about how inaccurate and manipulated it is, it will still be used as a measure of inflation (and drive inflation expectations).

As I said before, banks may demand higher rates once they realize the old metrics they relied on are no longer valid. However, as long as they rely on the current metrics to determine mortgage interest rates, and/or the FHA gives loans at the fake low rates, and/or the GSE's buy loans at the fake low rates, the rates will stay low.

[Valley Observer]

150 et al, I agree that the individual buyers who are now underwater and/or faced with resets they can't afford are at fault for entering into unrealistic deals. They had a lot of help from the brokers and lenders, but they did it themselves, so I don't feel very sorry for them.

But as a homeowner and owner of a property I'd like to sell in the near to medium future, I am faced with a large-scale disaster, and I can't blame any individual borrower who's over his head for creating it. The problem as it effects me isn't that somebody made an unwise decision that has led to foreclosure, the problem is that millions of people did, and that's a giant systemic problem, not a lot of individual problems. The lenders made loans likely to go into default, helped by their accomplices such as the rating agencies and secondary marketeers who fobbed these off as solid securities, "as safe as houses". They should have acted as the adults in the game and maintained reasonable underwriting standards.

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