It seems more than appropriate that today - Memorial Day - I remind everyone of one of the best and longest-lasting veteran benefits available to those who have done the highest duty our country can ask of them - to protect us with their lives.
Since 1944 the VA home loan guaranty program has enabled young veterans the ability to buy a home with $0 down. This was originally conceived in recognition that young men and women serving in the military have not had the opportunity to establish a strong line of credit and gainful income while they have been on active duty. By allowing servicemen and women the opportunity to buy a home with low closing costs and no money down, millions of veterans have been able to purchase homes for their families that they otherwise could not.
In a time when we have seen veteran benefits be stripped down rather than strengthened, I am heartened to know that such a tremendous program still exists, and I am proud to say that I not only have family members who have benefited from this program, but I have had the privilege of putting several clients into a home through this program.
Thank you to our troops, and God bless America!
To learn more about the VA program, please visit: http://www.homeloans.va.gov/.
Kim Koenig is a REALTOR® serving the greater North Dallas area.
Monday, May 31, 2010
Tuesday, May 18, 2010
The Truth About the Shadow Inventory
If you aren't yet familiar with the term "shadow inventory", try to think of it as 2010's "subprime mortgage". Before 2006/07, the average person probably wasn't too familiar with what a subprime mortgage was, but what started as a whisper about this previously unfamiliar term soon became common vernacular when a surge of foreclosures began to hit the market, and of course the rest is history.
The shadow inventory is an important housing issue which has been whispered about for about a year now, and that whisper is quickly swelling to what soon will be a loud bellow emanating from your television screens, computer monitors, and sooner than later, as commonly tossed around in casual conversation as "subprime mortgage". But what is the shadow inventory?
Interestingly, it began as what many considered a conspiracy theory: Banks were holding onto millions of distressed properties in order to not overwhelm the market, as well as create the appearance that there were not as many foreclosures as there actually were. But what began as only a theory has turned out to be, at least in part, true. While some banks may have been withholding a certain percentage of their inventories, the reality is that everything from court delays to an overwhelming backlog of paperwork caused a massive slowdown in foreclosures hitting the market. Further complicating the issue is that we don't know with any certainty just how many homes are part of the shadow inventory. These foreclosures, or REOs, plus delinquent borrowers may total anywhere from 1.7 million to over 7 million homes. That's quite a wide disparity when you're trying to determine how the inventory may affect the market.
According to the credit rating agency Standard & Poors, which deals in the total value of these properties rather than the individual numbers, believes that total inventory value (at nearly $500B) is the equivalent of a 33-month supply, a conservative estimate by their own account. In other words, we should expect that it will take at least 3 years to burn off the shadow inventory.
Further, another reliable credit ratings agency, Moody's, suggests that the underwhelming performance of the Treasury Department's attempts to incentivize mortgagors to modify troubled loans may push home values down as much as 8% by the end of 2010 because banks have increasingly opted to liquidate loans, rather than modify them.
So what does all of this mean for Dallas sellers? First, you can expect that the strong majority of this shadow inventory will be concentrated in the same troubled states that have already been taking the brunt of the housing collapse (ie, California, Nevada, Florida, etc.). So let's take the worst case scenario and say that there are 7 million homes which have yet to hit the market. During the height of the collapse, the top 5 states held over 50% of all foreclosures in the US, so let's automatically cut that 7 million in half to 3.5 million. Then let's split that among the other 45 states - approximately 78,000 homes. Let's further split that into the four major metropolitan areas of Texas. That knocks it down to just over 19,000 homes over a 3 year period, or at worst, approximately 6,500 additional homes per year in DFW. This represents only a fraction of our overall sold inventory, so in a very practical sense, Dallas sellers should not expect their home values to change significantly based on these numbers.
However, if the effect of this shadow inventory continues to take a toll on housing at a national level, which it most certainly will (though to what degree is as yet unknown), then this may significantly affect mortgage rates and the availability of financing, which most certainly will make a significant difference to those trying to sell.
Bottom line: Take a look around. No matter what's happening in the rest of the country, the best gauge you can use for how well and how quickly your house will sell is by what's happening in your neighborhood right now.
Kim Koenig is a REALTOR® serving the greater North Dallas area.
www.kimkoenig.com
kim@kimkoenig.com
214.415.9221
The shadow inventory is an important housing issue which has been whispered about for about a year now, and that whisper is quickly swelling to what soon will be a loud bellow emanating from your television screens, computer monitors, and sooner than later, as commonly tossed around in casual conversation as "subprime mortgage". But what is the shadow inventory?
Interestingly, it began as what many considered a conspiracy theory: Banks were holding onto millions of distressed properties in order to not overwhelm the market, as well as create the appearance that there were not as many foreclosures as there actually were. But what began as only a theory has turned out to be, at least in part, true. While some banks may have been withholding a certain percentage of their inventories, the reality is that everything from court delays to an overwhelming backlog of paperwork caused a massive slowdown in foreclosures hitting the market. Further complicating the issue is that we don't know with any certainty just how many homes are part of the shadow inventory. These foreclosures, or REOs, plus delinquent borrowers may total anywhere from 1.7 million to over 7 million homes. That's quite a wide disparity when you're trying to determine how the inventory may affect the market.
According to the credit rating agency Standard & Poors, which deals in the total value of these properties rather than the individual numbers, believes that total inventory value (at nearly $500B) is the equivalent of a 33-month supply, a conservative estimate by their own account. In other words, we should expect that it will take at least 3 years to burn off the shadow inventory.
Further, another reliable credit ratings agency, Moody's, suggests that the underwhelming performance of the Treasury Department's attempts to incentivize mortgagors to modify troubled loans may push home values down as much as 8% by the end of 2010 because banks have increasingly opted to liquidate loans, rather than modify them.
So what does all of this mean for Dallas sellers? First, you can expect that the strong majority of this shadow inventory will be concentrated in the same troubled states that have already been taking the brunt of the housing collapse (ie, California, Nevada, Florida, etc.). So let's take the worst case scenario and say that there are 7 million homes which have yet to hit the market. During the height of the collapse, the top 5 states held over 50% of all foreclosures in the US, so let's automatically cut that 7 million in half to 3.5 million. Then let's split that among the other 45 states - approximately 78,000 homes. Let's further split that into the four major metropolitan areas of Texas. That knocks it down to just over 19,000 homes over a 3 year period, or at worst, approximately 6,500 additional homes per year in DFW. This represents only a fraction of our overall sold inventory, so in a very practical sense, Dallas sellers should not expect their home values to change significantly based on these numbers.
However, if the effect of this shadow inventory continues to take a toll on housing at a national level, which it most certainly will (though to what degree is as yet unknown), then this may significantly affect mortgage rates and the availability of financing, which most certainly will make a significant difference to those trying to sell.
Bottom line: Take a look around. No matter what's happening in the rest of the country, the best gauge you can use for how well and how quickly your house will sell is by what's happening in your neighborhood right now.
Kim Koenig is a REALTOR® serving the greater North Dallas area.
www.kimkoenig.com
kim@kimkoenig.com
214.415.9221
Subscribe to:
Posts (Atom)
