After what feels like an election cycle that has lasted forever (over eighteen months in New Hampshire) perhaps we can get on with the business of running our lives and business in a stable environment. While I’m not a great fan on what has happened over the last four years in Washington, at least we know where we are and given no great new changes in the economy or in Washington and there are some realities that are pretty apparent.
Clearly, housing has bottomed and there are signs of a kind of stability in residential housing. The majority of sales are Bank/lender owned properties; a record number of which are selling for cash. My own experience is that about thirty percent of sales are cash. I have spoken with other REALTORS in our area a few have reported cash sales as high as forty percent and a few have reported cash sales of around twenty-five percent, but all are in agreement the cash sales represent a huge chunk of the residential business at this time. The drivers here are the truly low interest rates that savers can earn on any cash reserves they may have, the difficulty in obtaining financing generally and the difficulty in obtaining financing specifically on bank/lender owned properties due to the generally poor condition of these properties. The Federal Reserves continued commitment to keeping interest rates low into 2014 means this is likely to remain a major part of real estate sales into the future.
The end of the loan modification programs from Fannie Mae and Freddie Mac means that the message is clear to borrowers: if you want to keep your house you must pay the mortgage. These programs were almost criminally maladministered and sent mixed messages to home owners. Many homeowners stopped making their mortgage payments so that they could take advantage of these programs and actually ended up loosing their homes. The disappearance of these programs is likely to stabilize the housing market more than any other single event. More stable housing market = fewer foreclosures = better prices = housing recovery, although it will still take years to work through the backlog of homes in various stages of foreclosure.
The current administration remaining in office in Washington is also probably good news for housing and the average home buyer. It is more likely that the current administration will act to support the concept of a secondary market for home mortgages through Fannie Mae and Freddie Mac. Proposals put out by some of the more conservative supporters of the Republicans in the last election cycle to dismantle Fannie Mae and Freddie Mac and to have required huge down payments would have been a greater drag on housing and the economy than any of the various proposed limitations on interest deductions on home mortgages. Any thing that eases housing lending will be good for a recovery in housing.
Banks/lenders have been far more proactive about foreclosing on properties in recent weeks and months. They have been quicker to act on delinquencies and been quicker to act in putting properties on the market than at anytime in the last five years.
The primary focus in housing sales for the foreseeable year or more is likely to be bank/lender owned properties. Until a significant share of the foreclosure back log is burned up through new sales, foreclosures will be the driving force in house prices leaving little or no room for price increases through this and most regions of the country with first timers and investors being the primary source of buyers.
By Dick Thackston CRB, ABR, ABRM
Broker NH, MA & VT