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The Foreclosure Market Gone Wild

September 12, 2007 on 12:47 am | In Houses To Go General | No Comments

The bubble has burst. There is no secret that the home sales bubble has burst. Sure there are people still living in their towers and saying there is nothing wrong. The banking industry knows all to well that the money trees of yesterday are all picked bare and no one has planted any new trees. The lending business is going bust and has created their own foreclosure monster. The loan officers giddy child like happiness has turned into nightmares in the middle of the day. When the country has one of the largest home mortgage lenders go bust, you cannot deny the foreclosure problems that are currently here.

We entered into the foreclosure market 3 years back, looking at property investment opportunities. The banks at this time were riding so high then, you would see them buy back their own foreclosed properties and list with agents who were willing to make a deal. They would take the house and have the agents get the home listed and would only lower the full retail value slightly, when the houses were in total need of rehab and solid cash flow in for repairs. They did not care, the rates were so low and a loan was given to anyone who could walk, crawl or stumble through their doors. People would buy these run down foreclosure properties for only slight discounts. These where not the house flippers that everyone was hearing about. These were people who wanted their own home and thought they would get it through sweat equity. The only problem, materials still cost more than what people think and their skill levels were not as high as what they thought. This then going full circle back to a home foreclosure once again.

These houses are now all hitting the markets again and the banks can’t give them away now. The house flippers self employment and easy fast cash days, has turned into nightmares also of the foreclosure monster. The come lately flippers and a few experienced ones have become trapped in their own webs they weaved. These last houses where hitting on bad housing market times with high price tags in areas where the general person could not afford the bill. The smaller flippers just cutting the loss and running away from their mortgages, leaving the banks with the same houses they held the pricing to high before on was now their’s again. The same house this time has no one waiting with a pocket full of cash to buy it. The larger flippers are trying to hold on and use profits of yesterday to weather the foreclosure storm of today. Many going to “turn key” and “land Contract” deals, still finding out they are still left holding the home leans in the end also. Many have become landlords, not by choice.

The market will now have to correct itself by lowering the inflated home prices back down to respectable levels once again. See, this too causes great problems, before it can ever help. Remember the poor people who got talked in large low interest rate loans and ran from the banks pockets over flowing with cash? These are same people that paid the inflated prices on the home that is now worth less at full retail in todays housing market. It does not take a rocket scientist to see that having a home loan that exceeds what your house is worth can be a very bad thing. When the foreclosure monster comes a knock en, the little home owner is left no choice, but to go a running. This is a prime example of how the lending industry has created their own problems and now want the government to bail them out with tax dollars. When they were making millions I didn’t see them just giving taxpayers money then for nothing. Many banks made risky loans and know have to deal with it.

Now, if you walk into a bank today and tell them you would like a loan for property rehab investment they will say no faster, then they get you back in your car and off their lot. The banks are not going to be able to sit on their mountains of foreclosed properties for ever, they will also have to start pricing these houses to move again. This in turn will start a whole new wave of house flippers. These flippers will have to come to the table with considerable amounts out of pocket cash and know the timing is right.

The foreclosure monster grows each and everyday with no current end insight. The investor big and small will once again make millions on the market, only those who wait and save now, will be the ones to reap the benefits of tomorrows market.

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