Did you know that one in ten home buyers this year have been through a short sale or foreclosure? This number is more than double the number of the same type of buyers in 2012. If people keep their credit in tip top shape, pay bills on time, have a good employment record, and save money for a down payment it is possible to get certain types of mortgages just two to three years after a foreclosure or short sale. The length of time can also depend on the circumstances of the foreclosure or short sale, such as an illness, layoff or death. Divorce is not one of those circumstances that helps. With around 150,000 homes in Minnesota being sold as foreclosures or short sales from 2005 to 2012, that makes for a lot of former homeowners that could get back into the housing market as buyers! If you have been through a short sale or foreclosure and would like to buy a home, contact your mortgage banker to see what your options are.
Shadow inventory refers to distressed homes that are not yet on the market. This includes homes where the owner is over three months behind on mortgage payments, homes in foreclosure and homes that the bank owns but has not yet listed.
According to Corelogic, shadow inventory is down about 18.2% from one year ago. Nationally, foreclosure inventory is also down about 29% from one year ago. Homeowners that are delinquent on their mortgages are what creates the shadow inventory problem but this number has significantly decreased in the past year, with owners delinquent over 90 days down by 22.7%.
January 2010 was the height of the mortgage delinquency period. Right now the number of delinquent loans is still 1.4 times higher than the period of 1995 – 2005, but it is down significantly from the peak.
What does this mean? Lower shadow inventory means less distressed properties coming on the market. Distressed properties bring home prices down, so with less of those properties, prices can rise easier.
Since the housing market crash, most buyers have become professional bargain hunters, everyone wants a steal, but those foreclosure deals are dissipating! According to BusinessInsider.com, the discount on the purchase of a foreclosed home is now about 12% which is about the same as the pre-housing market crash discount. The discount hit its high point in around 2010 with a 30% discounted price on foreclosures but it has been steadily falling ever since. Currently there are many more homes on the market as short sales rather than foreclosures. So if you are looking for that amazing deal on a foreclosure you may have a hard time finding it, and if you do find it, chances are it will end up being a multiple offer situation which will drive up the price.
According to the 2012 Realtors Conference and Expo, the upward housing trend and market recovery should continue through at least 2014. Mortgage rates are forecast to rise to around 4% in 2013 and around 4.6% in 2014. With the rising housing demand and decline in housing inventory prices are also expected to continue to rise an average of about 5.1% in 2013. Home sales are also expected to increase about 8.7% in 2013.
Foreclosures and short sales will decline in their market share – in 2012 they are about 25% of the market and are forecast to be about 8% in 2014. Distressed properties are starting to be more like an after Christmas sale – the best stuff is all gone but there is still something to choose from.
People who purchased homes at low prices the last few years will see their equity grow in the next 4 years but renters will not only miss out on the equity gains, they will face rent rising at a fairly fast rate.