The Foreclosure Crisis As Viewed From Main Street
The foreclosure crisis is dominating much of the headlines in the Business and Economy sections of our national newspapers. Many "experts" from Wall Street are explaining how this is going to help us, hurt us, speed us up, slow us down, etc. While I do not pretend to understand the foreclosure crisis to the extent that many people in the upper echelons of the mortgage business do, I can tell you about the view from down here.
The big twist in this new crisis is that we are finding out that some of the documents that have been presented on behalf of some of the lenders have been "created" recently because the originals cannot be found. In the simplest sense, there are banks out there that cannot prove they have the right to foreclose on a loan.
The Foreclosure Crisis On Main Street
I am not qualified to address the impact this new twist in the foreclosure crisis is going to have on the national economy or the global banking business, but I can tell you very clearly, and very succinctly what its impact will be down on the streets in Tallahassee. And most likely down on the streets in your neck of the woods as well.
This new crisis is going to increase indecision and reduce consumer confidence. Home buyers are going to slow down to see how it works out, and they are going to fear making a hasty decision when buying a home because of the potential for major fallout from this new crisis.
We need consumer confidence to return to the real estate market. It is more important than loan products, tax credits, or anything else a Wall Street analyst might spin into our collective learning curves. We need people to believe that the real estate market can recover, and will recover. People are not going to live in the same place forever, and we're all not going to move out of our houses and start living in the streets, so it has to recover. But this will only occur once we remove the variables that are causing so much indecision from home buyers.
Pay Attention To Foreclosure Sales And New Lis Pendens Filings
We have monitored the ratio between new foreclosure filings (lis pendens) and actual foreclosure sales for many years here at the Tallahassee Real Estate Blog. The trend in the recent 18 months has been towards banks moving faster to fix the problem (blue line in graph below), but this problem is most likely going to slow down the recovery.
The real estate graph above shows the current trend of new foreclosure filings (green bars) is falling, while the trend of foreclosure sales (red bars) is rising, meaning banks are moving faster to resolve the problems they have with non performing loans. While foreclosure sales have a sad implication, the fact is we all know they need to occur, and the sooner they do, the sooner the market will recover its confidence and the soon we will see the number of buyers return to the real estate market.