I think the big question on everyone’s mind is when will we see foreclosures slowdown and start to clear out of the homes for sale funnel. The fourth quarter of 2010 was certainly no indication of this happening as foreclosures came in at 4.63% of US mortgages according to the Mortgage Bankers Association.
Part of the increase at the end of the year was the fact that many of the issues forcing banks to halt foreclosures earlier in the year have been resolved and banks are again turning the screws on delinquent homeowners.
I recently saw an example of the damage or opportunities the foreclosures are having on the local real estate market as I pass a home for sale on my way to work everyday that sold for just under $1 million at the peak of the real estate market in 2006 and is now listed as a foreclosure at $495,000. This seems like a screaming deal to me but I spoke to a local Realtor who believes it will come down quite a bit more before it is truly a good deal.
The challenge we face in the foreclosure market is that in addition to all the sub prime mortgages that never should have made and are defaulting at a high rate, we are continuing to see many more upper bracket homes with conventional mortgages slipping into foreclosure. Imagine buying a beautiful home in 2006 for $1.2 million and realizing that it appraises for $675,000 today. It could be 10 years plus before your home is worth what you are paying for it with your monthly mortgage payment.
For more and more people it seems more fiscally responsible to take the hit on your credit report, walk away from your super upside down mortgage, rent a home if need be, and invest the difference into your retirement plan.
On the opportunity/home buyer side of the problem, RealtyTrac listed states with the largest % of savings based on January 2011 avg. sales price vs. avg. foreclosure sales price.
State Foreclosure Savings
North Carolina 38%
What is your prediction for when the foreclosure market will start to slow down?