Existing home sales increased last June for the third consecutive month, a 3.6% increase over May 2009 and just 0.02% below the June 2008 home sales figures. That makes up 31 percent of all existing home sales in the entire United States. last June they were foreclosures or short sales.
Think about that for a second … Nearly one in three homes sold last month sold for less than what was owed to the lender. According to the National Association of Realtors, 4.89 million homes were sold in June, that is, 1,515,900 times that banks agreed, or were forced, to take losses. To put this in perspective, if you sold all the homes in New Hampshire, North Dakota, and Vermont for less than what the homeowners paid, you would still have to sell all the homes in Wyoming for a loss before reaching the same amount of losses. banks took in June. These figures are simply staggering.
But what does all this mean for home buyers and sellers? If you are a homeowner in Southern California and you bought your home in the past seven years, chances are your home is worth less than what you paid for. Worse, if you borrowed 90% or more against your home, you owe the bank more than it is worth. Understanding that most families buy and sell every five years means that if you bought around 2004 or 2005, you are likely to consider moving. If you want to do this, the statistics show that you will not walk away with money and you will have to convince the bank to accept less or you will face foreclosure.
If you haven’t lost your job, don’t have a loan that is reinstated at a higher interest rate, or if you’re not paying less than the full monthly freight (see negative-amortizing loans), you may decide to stay. That is, unless you are facing a personal reason for moving, such as job changes or other personal family matters. Unfortunately for many, this choice is not that simple.
Many families live month to month. Even the smallest change in income can offset the ability to pay for the most basic necessities. Gas, heat, food all become difficult purchases, and the biggest expense, our mortgage payment, becomes almost impossible to cover.
As our recession continues, each of us becomes less insulated against the recession and we begin to see how intertwined our economy has become. How dependent are our upper-middle and upper-middle-class families on the large groups of consumers found in lower- and middle-class working families. When greater America stops buying goods, the business owners who sell them quickly retire. Even the most powerful companies begin to falter.
However, Americans are opportunistic people. The drive for success and the freedom to do so make us a unique and resilient nation. When faced with adversity, we think back to problems and find a new solution. Finally, a new trademark emerges from the ashes and people go back to work. Solutions are rarely dictated by oversight committees or government intervention, but are driven by the force of American will and a desire to survive. What comes out of this will is a firm foundation and a return to solid foundations.
In commercial real estate this translates into investments that generate income based on real information, not speculative projections. In housing, it means that home buyers and borrowers depend on their actual ability to pay the mortgage compared to the ease with which they can borrow money to make their housing decisions. In city planning, it means that public funds will go to projects of necessity, not political fantasy. Finally in development means that the Field of Dreams mindset has left the building. Now you only build if they are there …
Ultimately, the result is the continued appreciation of the United States. The need and desire for real estate assets does not dissipate or disappear, it simply expands or contracts as needs change within our economy. Many factors continue to challenge the real estate industry and many concerns have yet to be addressed. Amid the chaos, rays of light continue to find their way through the clouds.
This week’s home sales figures indicate a convergence of two key components of the housing market: the desire to buy and the ability to pay. Without the willingness of consumers to place their funds, transactions do not occur. Without the ability to find those funds, even the most determined consumer cannot buy. The US housing market, which led us into this recession, seems to be telling us that we may have bottomed out. Even as lenders have tightened finances and job losses abound, prices have fallen to a level where more of us are willing to take the step toward homeownership, more and more with each passing day. month that passes.
But what about those foreclosures? First, it is important to note that we are not out of the woods just yet. Many homeowners still face foreclosure, and many banks hold large inventories of non-performing assets. Second, the pace is a very important factor. We are at the peak of the summer home buying season and banks have slowed the rate at which they foreclose or bring REO properties to market. If banks launch mass foreclosures onto the market when home buyers almost disappear in the winter months, we may see a turnaround.
For now, if you think the time is right to launch into the domestic market, you are not alone. If you’ve waited and watched for the past five years wondering if you would ever have a chance to achieve the American Dream, feel vindicated that your opportunity is now before you.