It is hard to believe that another year is upon us, and given the beating we've all taken in the last three years, it is with cautious and hopeful optimism that we tread lightly into 2010.
That said, it is with my own tentative enthusiasm that I'm hopeful for the future of Real Estate, the general economy, and our fragile psyches as we endeavor into a new decade with a quiet resolve that could have never come about without the painful lessons learned and a humility earned from a new and unprecedented history now authored:
The summer of 2007 marked the beginning of the first felt effects of the credit crisis as home sales began to rapidly decline. Despite the hand writing on the wall, we kept our chins up, hoping that the slump was just a momentary hiccup in the endless skyward ascent to personal and collective abundance. The news of the collapse of Lehman Brothers and the fundamental restructuring of Wall Street in October of 2008 made it apparent that the economic state of the country was in far worse shape than anyone would have cared to admit.
As we began to navigate the murky waters of the economic crisis, there was much anticipation that a growing wave of distressed properties would soon hit the marketplace. Though there has undoubtedly been a steady stream of defaulted residential loans, displaced homeowners, and REO properties coming to market until recently, the anticipated downfall in the commercial arena has not been as astronomical as expected. This can be attributed mostly to legislative action that has dissuaded lenders from taking any steps towards mitigating troubled assets that remain on their books.
Today, residential foreclosures have slowed significantly in pace, mainly due to the the banks withholding in excess of 14 million units from the market while investors, bargain hunters, and first time home owners clamor over one another to win a chance at owning the few REO, or bank owned properties, that are actively being brought to market.
Traditional home sales continue to prove a challenge because of ever declining values of many properties in the area from depreciation that the foreclosure fallout has created and the discrepancy between today's value and what homeowners are willing and able to sell their properties for. The bottom line is that you better have a lot of equity in the property if you want to escape unscathed, still in the black. Anyone else is just going to have to sit tight for a while or negotiate a short sale with the bank.
Short sales really do seem to be the best bet for homeowners who are facing the ugly truth of their resetting ARM loans and the banks are beefing up their loss mitigation departments to handle the onslaught of requests from home owners looking to sell. As I'm finding in my own business, the banks want to negotiate a short sale with the seller, as this is a less costly option than foreclosure.
The reality is, no one has a crystal ball to accurately predict exactly how this crisis will play out, but industry experts are making a few presumptions about the broader picture of real estate and capital markets:
The housing market will ultimately be affected by the distressed asset recycling process, which will consist of slow rolling waves over time, as opposed to an avalanche of property and debt hitting the market at once. These 'waves' will be created by several factors including:
Further motivation to bring distressed assets to market now relies on the prediction by many economists that unemployment rates will not immediately rebound once attrition of debt begins to reach steady levels in the marketplace. This after effect may even continue beyond the point where job creation begins to pick up again. The Fed will also eventually have to remove itself as a crutch in the market by terminating purchases of mortgage backed securities, which will motivate the banks to deal with the the reality of their bottom lines.
These trends, though painful, are actually positive for the marketplace. The sooner this natural correction can occur, the sooner a steady rebound will follow by creating opportunity for buyers and the return to a stabilized and healthy market.
Our job now as consumers, homeowners, and investors is to create a healthy future through realistic assumptions, sound judgment, and a healthy attitude towards 'want' vs. 'need.' This is still the land of opportunity where dreams can and do come true and we should all aim for our greatest vision for our lives. Let's just make sure we do it this time with a little more humility, gratitude, and critical analysis.
Wishing you abundance, joy, and many successes in 2010!
Bree
That said, it is with my own tentative enthusiasm that I'm hopeful for the future of Real Estate, the general economy, and our fragile psyches as we endeavor into a new decade with a quiet resolve that could have never come about without the painful lessons learned and a humility earned from a new and unprecedented history now authored:
The summer of 2007 marked the beginning of the first felt effects of the credit crisis as home sales began to rapidly decline. Despite the hand writing on the wall, we kept our chins up, hoping that the slump was just a momentary hiccup in the endless skyward ascent to personal and collective abundance. The news of the collapse of Lehman Brothers and the fundamental restructuring of Wall Street in October of 2008 made it apparent that the economic state of the country was in far worse shape than anyone would have cared to admit.
As we began to navigate the murky waters of the economic crisis, there was much anticipation that a growing wave of distressed properties would soon hit the marketplace. Though there has undoubtedly been a steady stream of defaulted residential loans, displaced homeowners, and REO properties coming to market until recently, the anticipated downfall in the commercial arena has not been as astronomical as expected. This can be attributed mostly to legislative action that has dissuaded lenders from taking any steps towards mitigating troubled assets that remain on their books.
Today, residential foreclosures have slowed significantly in pace, mainly due to the the banks withholding in excess of 14 million units from the market while investors, bargain hunters, and first time home owners clamor over one another to win a chance at owning the few REO, or bank owned properties, that are actively being brought to market.
Traditional home sales continue to prove a challenge because of ever declining values of many properties in the area from depreciation that the foreclosure fallout has created and the discrepancy between today's value and what homeowners are willing and able to sell their properties for. The bottom line is that you better have a lot of equity in the property if you want to escape unscathed, still in the black. Anyone else is just going to have to sit tight for a while or negotiate a short sale with the bank.
Short sales really do seem to be the best bet for homeowners who are facing the ugly truth of their resetting ARM loans and the banks are beefing up their loss mitigation departments to handle the onslaught of requests from home owners looking to sell. As I'm finding in my own business, the banks want to negotiate a short sale with the seller, as this is a less costly option than foreclosure.
The reality is, no one has a crystal ball to accurately predict exactly how this crisis will play out, but industry experts are making a few presumptions about the broader picture of real estate and capital markets:
The housing market will ultimately be affected by the distressed asset recycling process, which will consist of slow rolling waves over time, as opposed to an avalanche of property and debt hitting the market at once. These 'waves' will be created by several factors including:
- Interest Reserve Burn Off:
- Expiration of Interest-only Periods:
- Conversion of Floating-rate Provisions to Fixed-rate:
- Mortgage Maturity:
Further motivation to bring distressed assets to market now relies on the prediction by many economists that unemployment rates will not immediately rebound once attrition of debt begins to reach steady levels in the marketplace. This after effect may even continue beyond the point where job creation begins to pick up again. The Fed will also eventually have to remove itself as a crutch in the market by terminating purchases of mortgage backed securities, which will motivate the banks to deal with the the reality of their bottom lines.
These trends, though painful, are actually positive for the marketplace. The sooner this natural correction can occur, the sooner a steady rebound will follow by creating opportunity for buyers and the return to a stabilized and healthy market.
Our job now as consumers, homeowners, and investors is to create a healthy future through realistic assumptions, sound judgment, and a healthy attitude towards 'want' vs. 'need.' This is still the land of opportunity where dreams can and do come true and we should all aim for our greatest vision for our lives. Let's just make sure we do it this time with a little more humility, gratitude, and critical analysis.
Wishing you abundance, joy, and many successes in 2010!
Bree
There are definitely some difficult times ahead but as a lover of LA, I stay focused on the big picture--US population is projected to grow by 100 million, LA's population will continue to share in that growth, LA's economy will improve, and people will want to buy homes and condos in LA.
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