Are we there yet?
How many times have I heard that one? Raising 3 boys and taking car trips and I guess it must have been hundreds of times I was asked that. The last time I remember hearing it was just before I gave my new GPS to my 12 year old and then he started telling me when we would be there. That was cool.
Well, I got asked that same question a couple of days ago at the Firestone repair shop at the Mall of Georgia. At least that is what it sounded like to me. I was talking to a fellow customer while we were waiting and he asked me “When do you think the foreclosure mess will be over?”.
I guess if I could answer that precisely I would be telling fortunes and winning the lottery but I enjoyed the conversation. It was a simple question with a complex answer. Here are a few points we talked about.
1. Foreclosures are at an all time high. That does sound bad but it had to happen. We made a bunch of loans that we should not have and that combined with the employment problems gives us the trouble we have right now. The fact that it is at record highs means we are burning through these foreclosures and the end is closer than it was.
2. About 40% of our sales are distressed properties. Short sale, foreclosure and bank owned make up most of that number. We sold about 5 million houses in 2009 and 2010 is shaping up to be about 5.5 million units so we are selling what we would call a normal amount for our population based on past numbers. 60% would be retail sales with a few new construction added in. At that rate of sales we are burning through the foreclosures at a 2 to 1 ratio. For every 1 coming into the market we are selling 2 so we are gaining on it.
3. Housing prices are stabilizing and even increasing in some areas. We saw about a 1% increase last year on average so the big decline seems to be at an end. Interest rates are still at record lows and that means affordability is the best it’s been in years. Once unemployment begins to be addressed we are poised for a rapid improvement in housing. It is still going to take some time but I think we are going to see a slow but steady increase in housing prices and sales. Maybe another year as long as we continue to improve.
4. Keep in mind that the big fear is over inflation and the fear of inflation will drive interest rates up. They have been going up for a few days now but we are still very low historically. 4.5% is a great rate and is readily available to people that can show the ability to pay back the loan if they have had a good credit history up to now. Credit scores of 640 and higher qualify for FHA financing at rates like 4.5% so don’t believe the rumors that banks are not lending money. It’s not easy but it is getting done.
I’ll provide some more of the conversation later so I can keep this short but stay tuned for more in a day or so. Remember that I am never too busy for your referrals so please call me with the name and business number of anyone needing the sort of service I provide. I am here to help.
Thanks for listening,
Jerry Robertson
Associate Broker
678-231-1578 Cell