Amidst all of Hurricane Sandy’s destruction, there is actually some good news when it comes to the housing market. Foreclosures are down in more than 60% of the nation’s largest cities, according to RealtyTrac, and experts are pointing to that as a sign of stabilization in the housing market.
Not only did foreclosure rates fall by more than 25% in major cities such as San Francisco, Detroit, and Los Angeles during the third quarter of the year, but they actually dipped below 2007 levels for 58% of the country’s major metropolitan areas. That’s undoubtedly good news for the economy in general and those of us who work in fields tied to the housing market, but things aren’t quite so peachy everywhere.
Foreclosure rates actually rose in places like Tampa (43%), Jacksonville (32%), Orlando (15%), Miami (11%), and Chicago (34% from last year). Much of this can be attributed to the fact that foreclosures in Florida and Illinois must be approved by the courts, and since loan originators have been under scrutiny for robo-signing practices, there have been delays while they attempt to get their ducks in a row prior to appearing before a judge.
Regardless of where you live, there are a few important things to keep in mind in terms of the current housing market environment.
- If you’re a buyer, there are still lucrative opportunities out there: Banks have a huge inventory of foreclosed properties on their hands, and a true housing market recovery isn’t expected until they are sold. In the meantime, foreclosed homes continue to depreciate in value given the fact that no one is taking care of them, thereby dragging down the value of neighboring residences as well. Banks obviously want to mitigate such collateral damage, so they are incentivized to flip foreclosed properties as quickly as possible. When you further consider that mortgage rates are at record lows, it’s clear that now is a good time to buy if you can both swing it financially and get over the stigma of buying a foreclosed property. For example, I know someone who recently purchased a foreclosed penthouse condo for $100k less than its market value, painted it, and then flipped it just a few weeks later for a huge profit simply because he saw an opportunity where no one else did.
- If you’re a homeowner, you can minimize the threat of a foreclosure: Not only are major mortgage lenders subject to an independent foreclosure review, which gives people who have already been foreclosed upon a chance for financial compensation if errors were made, but you can also challenge foreclosure proceedings on a number of different grounds. For example, a foreclosure may not be allowed to proceed if the lender is unable to provide documented proof of mortgage ownership, has overstated the payment it would take to reinstate your mortgage, or has violated federal/state law. Depending on where you live, you’ll either be able to raise a defense during your standard judicial foreclosure hearing or by filing a lawsuit.
- We as a society can’t revert back to pre-recession spending: Regardless of how much the housing market has improved, we cannot go back to pre-recession spending habits. For anyone working in a field at all tied to the housing industry (more folks than you might think), pre-recession spending was buoyed by the housing bubble, and short of another bubble forming, those spending levels must remain a thing of the past. The failure of a lot of people to recognize this has undoubtedly played a role in consumers adding $46.7 billion in new credit card debt during 2011 as well as being projected to add another $43.5 billion to our tab this year.
With that being said, we must all adjust to this post-recession environment, as it offers both a lot of opportunity and the potential to make costly mistakes.