Virtually Green: What the Real Estate Business WILL Become (coming Monday 8/25)
Dropping the F Bomb: Recovery's Starting Point
For years real estate foreclosures have been a small percentage of the overall market place but still having a powerful affect on values. In the Indianapolis market foreclosures for many years were 7-9% of all properties sold over the course of any one year. Then came 2006....and 2007....and this year. In the latter part of 2006 foreclosures began to run rampant gobbling up a 15% share in the 4th quarter of the year. In 2007 that number rose to 23% of all properties sold and in the last 90 days here in 2008 foreclosures both nationally and locally were running as high as 30% of all homes in the market in a given price point. From a realtor's perspective, that's a stunning number.
30% is a stunning number because that means 1 in 3 homeowners who are selling have lost their property to a lender. It's a stunning number because it destroys value in other resales homes in a given neighborhood or township. It's a stunning number because it also means that municipalities have been denied the property tax revenue for those homes that's needed to provide essential community services. It's a stunning number because over a prolonged time period, it sets a totally different benchmark for comparable sales that affect the lives of many real people who are dependant upon the equity that they've created in their homes.
The crystal ball is still very murky but eventually we are going to see the foreclosure numbers turn. The recent passage of the 'housing bill' will allow many of the millions of sub prime loans made in '06,'07 and '08 to be refinanaced, thus saving them from the foreclosure wrecking ball. That will be a huge factor in any recovery from the housing depression we're in. It seems that the bottom of the trough may come late in 2008 or early in 2009 with the potential for the overall foreclosure market to begin to recede. When it does the resale market will begin to correct it's excessive inventory and eventually new home construction will begin to improve. But that's at least a year away. For now, simply saving more residences from ending up overgrown, dilapidated and depressing to many of their closest residences is a noble goal. It's one that actually may be in sight as the proverbial 'light at the end of the tunnel.' How far off that light is or how soon it becomes reality is still unclear. How soon it comes will determine whether our housing slowdown is a 'V' or a prolonged 'U.' For the sake of everyone's financial sanity, let' drop the F bomb NOW....and make certain that letter is a quick V instead of a long term U.
Questions? Comments? Donations? Greg@GregCooper.com or 317.848.GREG (4734)