The other day while showing homes to a client, I was asked if the decrease in the amount of homes we were previewing signaled a "turning point" or an end to this housing downturn in Arizona. To my buyer's astonishment, my response was "NO."
He asked why? Well this is the answer I gave him:
Although the amount of foreclosure listings have decreased as investors and new homebuyers have entered the market, another little known occurence has been happening. Banks, who are still foreclosing, have been withholding the release of inventory. Why? Well by releasing this inventory slowly, they can help to maintain prices and maximize a return, if there is any left. Moreover, many homeowners are turning to loan modifications or short sales to mitigate their situations. Short sales can take 6 months to process and there can be delays with the foreclosure process. Moreover, when the new administration came to office, the first few months had a moratorium on foreclosures. That has caused a slowing. After all, banks really do not want to foreclose.
Although we have seen a large turnover of homes that were financed using option arms and subprime loans, we are still in for more. After all, many Arizona homeowners took the "safer route" and bought or refinanced homes in 2005 with 5 year arms. Yes 5 years. We all know that as of next January we begin the 5 year anniversary of the largest part of this housing boom---2005.
When I had said this, his face lit up as he exclaimed, "There is more time." My response-"Absolutely!"
So in summary what does this all mean? Well as time goes on throughout this year more and more homeowners will turn to loan modifications and short sales as these 5 year arms correct, sending loan payments through the roof. What does this mean, more and more homes will either be sold at short sale or foreclosure through 2010 and 2011.
For more information about Short Sales and Foreclosures, contact Todd Hillman at 602-376-0706.
