We’re wondered before what the effect of all the distress sales would have on the size of the pool of potential home buyers.
… historically, only 15 percent of consumers have found themselves with a credit score below 600. Now, a quarter of consumers fit the profile.
Well, there’s 10% shut out of the market because it’s nearly impossible these days to can get a mortgage with a FICO score of 600 or less. And really, you need a credit score of 660+ to be in the game.
So I’ll guess that we’ve lost way over 10% of the potential home buyers to the increase in bad credit ratings caused by short sales, foreclosures, deeds-in-lieu, bankruptcies, a bad economy and other stuff. The article doesn’t say that. I’m just extrapolating.
The Good News
When those Arizonans start qualifying for Arizona home mortgages again in a few years, it’ll be as if a huge stream of people started to move to Arizona ready to buy homes.
{ 13 comments… read them below or add one }
Mark 07.13.10 at 11:56 am
What about our massive babyboomer population, in a few years, wanting to cash out, scale down, move out to Oregon, etc? Nobody talks about the babyboomers anymore. Perhaps this isn’t a problem… I don’t know.
John Wake 07.13.10 at 12:38 pm
Some random thoughts on baby boomers.
- They will likely retire later than their parents for financial and lifestyle choice reasons.
- They will help fuel a surge of people moving to Arizona but the vast majority won’t move to retirement communities, baby boomers sure as heck don’t want to be like their parents’ generation (as usual).
- However, they will still want to live in communities that have a lot of amenities similar to those in retirement communities but that aren’t retirement communities.
- They will want to be near great health care so most will avoid very rural areas.
Anyway, Mark, I don’t think baby boomers are a problem, I think they will be a huge spur to Arizona real estate.
Ken44 07.13.10 at 5:32 pm
The Good News
When those Arizonans start qualifying for Arizona home mortgages again in a few years, it’ll be as if a huge stream of people started to move to Arizona ready to buy homes.——
I certainly hope you are right!
Cbass 07.13.10 at 10:03 pm
I don’t know John, your theory sounded good at first read. But after thinking about it for a bit this is the conclusion I come up with given that scenario.
The lessened demand from these absent buyers will add excess inventory. So therefore I think these absent buyers will just be absorbing excess inventory that has built up due to their absence. This will just delay market equilibrium and prevent RE values from appreciating until we reach that point.
Every action has an equal and opposite reaction and it seems like increased inventory will be the likely suspect. Just as the tax credit pulled demand forward and reduced inventory prematurely. Now we see sales are falling off a cliff so the expectation is that inventory will now begin to increase.
John Wake 07.13.10 at 10:44 pm
“The lessened demand from these absent buyers will add excess inventory.”
Cbass, I don’t understand your point. Help me. Are you saying the huge numbers of investors we’ve had will start selling and cause an oversupply of homes listed for sale?
ken44 07.14.10 at 6:26 am
—Now we see sales are falling off a cliff so the expectation is that inventory will now begin to increase.—-
And this is exactly what we are seeing now.
ken44 07.14.10 at 6:33 am
—-Are you saying the huge numbers of investors we’ve had will start selling and cause an oversupply of homes listed for sale?—
I don’t think investors will be putting their homes back on the market anytime soon. The banks no doubt still have a lot homes they need to dump. Until the banks are finished this housing market isn’t moving anywhere but down esp. with a rising inventory. If prices remain somewhat flat homeowners will be very lucky.
Mark 07.14.10 at 7:35 am
A little off-topic: Speaking of bank owned and foreclosures. I recently found out that 3 of my immediate neighbors are foreclosing, one’s already moved out. I googled foreclosures and sure enough I found plenty of them in my area, though the addresses don’t show up unless I sign up for a “free” trial. My question: is this information public domain, and is it available on-line for free?
Thanks
Cbass 07.14.10 at 7:44 am
John,
Sorry if the words “…add excess inventory.” was confusing or unclear. A better and more accurate way I could have said this would be “…reduce the normal absorption rate.” The net effect would be the same, inventory will rise due to abnormally low demand.
Does that make more sense what I was trying to say?
John Wake 07.14.10 at 1:38 pm
Mark,
Foreclosures are public data and I think you can find the notices online somewhere but it’s not useful to look at one Notice of Trustee Sale at a time.
So companies take the public Notices, input the data into a database and sell it in electronic form.
There are a lot of them out there. The company I buy the homes sold data from also has a company where you can subscribe to see that latest foreclosure information online. I can give you the name if you like.
Local Realtors have access to a lot of that foreclosure data via our MLS. The MLS pays an vendor to provide the foreclosure data to the MLS members.
John Wake 07.14.10 at 1:40 pm
Cbass, Thanks. John
Mark 07.15.10 at 5:46 pm
Thanks John!
Yes, please send me their coordinates, I’d like to register.
RE Investor 07.16.10 at 10:28 am
I doubt that many of the investors will be dumping any time soon. The only thing that could make investors dump enmasse would be a sharp tick up in unemployment, because unemployed tenants can’t pay. Otherwise, the rental market will probably be pretty steady as we move forward. This mostly will do with all of the displaced, employed “homeowners” walking away and moving to a rental home similar to their old home, in some cases down the block. Since they can’t buy, and probably won’t be able to in the intermediate future, the rental pool will increase. The risks of course to this are A: Unemployment takes a large tick up, B: the banks successfully start leasing the shadow inventory to former borrowers rather than foreclosing, or take a hit on their balance sheet and start cutting principal. Neither of which I think the banks are capable of doing. The most likely scenario is that borrowers will continue to be frustrated with the modification process and mail the keys as they are moving down the street to their local rental property, and prices will go down more, but investors will likely be able to keep rent rates steady or stable. Just my 2 cents.