5 reasons why REO continues strong through 2010.

1. Unemployment: Until people have the income to afford their mortgages, we will not see a recovery in the housing market. I believe a direct correlation exist between unemployment and mortgage defaults, the higher unemployment gets the more defaults we will see. This ultimately leads to more inventory and of course, lower home prices. 2. Tightening Credit Standards: The harder it gets for people to obtain the necessary credit to purchase a home the slower it will take to reduce the inventory we have. Make no mistake, I don’t believe in loosening credit standards for the sake of it but, it’s a fact that if people can’t get credit, inventory won’t reduce quickly and therefore slowing if not halting a housing recovery. 3. Artificial Government Inventory Control: In other words, arbitrary influence by the Government to keep unworthy homeowners in their homes at all cost. Make no mistake, this is housing inventory control in the most negative way. I have GSE Investor loan reinstatements after foreclosure on my desk right now where Fannie / Freddie is offering to reinstate a homeowners loan where they will consider unemployment benefits as income……..seriously! 4. Energy Prices: Did you realize that you are paying .86 cents more for gas this week than you were this same week last year? Most likely you haven’t noticed because we have all been pre-occupied with the nations job losses, underwear bombers, Massachusetts election, and Washington bleeding red ink. You may not have actively noticed it but, if energy prices continue to rise people will have less discretionary spending and that pulls buyers out of the market and couple this with Great Depression level unemployment and we end up with more housing inventory. 5. Risk of Hyperinflation: As the US currency continues to looses value against it’s competitors we find ourselves having no other choice but to increase inflation. If the Government continues to spend / make money with less and less value people refuse to hold onto the Dollar and start to move their assets into other currencies or metals and therefore an uncontrollable rise of inflation begins.

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Comments

Johnny Huang January 29, 2010 at 6:54am

I have a feeling almost everyone and their relatives is rushing to do million dollar BPO's for REO's.
Stephan K Black January 27, 2010 at 6:06pm

And to add another note, I'm not seeing all that many vacant homes as I used to, another fact of my micro-climate. Also another factor is more and more REO agents!! the pie slice is getting thinner! When I started in REO in 2007, geez, I had 25 listings given to me over 2 months. That ain't gonna happen again. But who knows, now I am doing way more default type BPO's on really nice homes, upscale!. At the beginning of the REO crisis, it was all subdivisions.
Stephan K Black January 27, 2010 at 6:02pm

Good observations. What I am thinking about is that REO is very region specific. While everything you say is true, what I am noticing in many newer subdivisions in my territory is that the big wave of REO has passed through them and there aren't any homes left to go REO, except onsey twosey's here and there. I may be wrong, but for my area, I think the major waves are over. Everything is a "micro-climate" with it's own realities. There's a lot of agricultural activity in my area which is actually a very stable industry (gotta eat!!) so my micro-climate isn't so affected by the generalization stated about continued unemployment. I'm sure the same is true for all who read this!
Mark McMahon January 26, 2010 at 7:14pm

As long as healthcare is the biggest component to the current administration, jobs and small business growth will continue to fall. Lower taxes and make incentives for those that can manage to stay in business. Rest assured, it won't happen, and more will fail, bringing short term gains to those of us that are able to see through the haze of big government. State of the union tomorrrow, I bet a small emphasis on healthcare and a larger on jobs. There will be a few cases that provided jobs at an even greater cost.

I am grateful for what I have and will hang on forever. Feel sorry for those who can't.
George Bellino January 26, 2010 at 4:40pm

As long as the short sale process stays the way it is more and more will hit the sheriff's steps and come to us. I see that REO's are starting to pick up a little bit and those AM companies are looking for more agents because two came to me this month already. It's ironic that I can't seem to land the accounts that I go after but the last two that came to me found me on the portals.
Rosemary Brooks January 26, 2010 at 7:56am

While I agree REOs are going to last the longest. I think come April Short Sales will increase and that whole process change just may add to the confusion. But at the end of the day: Foreclosures are not going anywhere soon because of jobs, hardships and we still have the adjustments for 2010 coming. Plus all the reasons listed by Jesse. The short sale options and delays will keep the numbers from blasting completely through the ceiling!
Heather Ozur January 26, 2010 at 6:47am

Jesse,

As always right on point! Great information for members to read.
Dawn Penrod January 26, 2010 at 4:30am

I'm sure seeing a direct correlation to unemployment and buyer's not wanting to buy right now. What if we all get what we want, more listings, and then no buyers because they are unemployed? Seeing figures that show sales plunged 17% in Dec.. in Houston, while it slows a little in Dec, it's still usually a decent month. I do a lot of bpo's and I'm seeing financing between 50 and 60 days on a pretty regular basis now. Prices continue decline, not necessarily because our market is flooded with REO, but in an attempt to entice buyers. I think 2010 is going to be more challenging that 2009.
Elba Cox January 26, 2010 at 3:53am

I amnew to REO Pro and my business is 90% short sales. REO's are the next logical step but do not know where to find the AM contacts for the aplications. Thanks!

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