Want to Restart the Housing Market? Don’t Forget About Foreclosures…
- May 09, 2008
Yesterday, the House passed a bill to help prevent foreclosures by urging the mortgage industry to write down the loan’s remaining principle in exchange for the Federal Housing Administration offering up a new loan with lower payments.
The plan’s future effect–and really, future–is still really questionable (the program still needs to get through the Senate and the president, who has said he will veto it; plus it would be voluntary–and according to today’s Wall Street Journal, the mortgage industry isn’t exactly doing cartwheels about signing on).
But the current state of the foreclosure market in this country is not–that’s actually quite certain. Just last week, new information from RealtyTrac said that the number of U.S. foreclosure filings had gone up for the seventh quarter in a row–rising to 649,917 at the end of March.
Foreclosures, RealtyTrac said, were up an astounding 112 percent from the first quarter of 2007.
The foreclosure market has become its own entity as its has grown. In areas particularly damaged by the housing slump, some real estate agents have begun to specialize in foreclosures, the way one might focus on a certain neighborhood, according to BusinessWeek; some are even offering bus tours of foreclosed homes for prospective buyers.
Take, for example, the Florida real estate agent who bought a church bus and painted "Foreclosure Tours R Us" on the side after noticing about 40 foreclosed properties a day hit the market.
"I’m taking the product off the market that’s driving our economy
down," Marc Joseph told NPR, "and I’m taking the product that is on the market and
putting it in the hands of people who deserve it — [the buyers] who
couldn’t afford it two and a half years ago."
You can’t really fault the guy–it’s true, he is selling properties that the market needs to be sold in order to recover.
And although you may have read a number of things about what a great value foreclosed properties are, recent research shows they might not be as attractive to buyers as you think.
a study recently released by Trulia.com, nearly 7 in 10 American adults associate "negative
aspects" foreclosed homes, U.S. News and World Report blogger Luke Mullins says.
But it’s not because they feel bad about buying someone else’s abandoned (or repossessed) home. Sixty-nine percent said they feared hidden costs; 35 percent said they felt it was a risky investment.
And 33 percent fretted the foreclosed home might lose value in the future.
Well. If that’s the general feeling, we’ve got some work to do. As we’ve said before, reducing the U.S. housing inventory is crucial to reigniting residential building and turning the housing market around–less supply means more demand, which means higher home prices. Everybody wins!
But if buyers see foreclosed homes as being taboo–and a whopping amount of them are making their way to the market each month–we could be a long way from that happening.
How do you think we can encourage buyers to purchase foreclosed homes? And what about getting credit to fund the purchase–should foreclosed homes come with a financial incentive, or are the price reductions enough?
Would you buy one? Have you?