Whew! Resale, residential real estate inventory is down all over town. In some price ranges and areas we are actually seeing some appreciation. Anyone looking for a nice, well priced home in the $100,000 – $200,000 range can tell you that. Many banks, brokers, buyers & sellers are starting to truly understand the short sale process and we’re seeing a much higher rate of closing.

Foreclosure crisis over right? I think not! There are some serious issues looming, some are here now:

  • Notice of Defaults: Up over 100% when measured against last year in Washoe County. The foreclosure moratorium (Winter ’08 – Spring ’09) put a cork in the bottle for a few months but we’d better brace for the next wave.
  • Option ARM’s: This next wave will be different and not just a sub-prime problem anymore. These are often nice, sometimes upscale homes and lenders were often incentivized to get these borrowers as much credit as possible. These borrowers have (or sometimes had) good jobs and great credit. For many “Pick a Payment” sounded like a good idea at the time. The number of units (properties/loans) re-setting is quite similar when compared to the sub-prime mess. The total dollar volume of these loans is significantly greater.
  • 5 stages of grief: Many Washoe County neighborhoods have depreciated 50 – 60% from the peak: Often these homeowners, not yet in distress, are either unaware or in some stage of denial. Besides, “Won’t the bank simply modify my loan”? I for one sure hope so but don’t hold much faith. I recently heard that over 70% of those borrowers granted loan modifications fell into default within 10 months.
  • HVCC: The Home Valuation Code of Conduct was intended to head off some of the nepotism inherent in the relationship between the banks & appraisers. It worked and loan officers can no longer communicate with the appraisers. We’re now losing 25 – 30% of our transactions over failed appraisals. I can’t blame the appraisers, why not get conservative? This lame attempt to curb favoritism has created an absolute lack of accountability and favors the unskilled.
  • Show me the money: China, Russia, Japan & many others are financing our low interest rates with their investment. That investment dropped significantly last month over fears that the US might be spending too much. Ya think??? No doubt they’ll come to the table with more funds in the future. It’s also likely they’ll want a greater return on investment or higher interest rates.

It’s going to be a long winter but I consider myself up to the task. It will likely fall in the laps of local Real Estate Professionals to fix it this time too.