Real Estate Market – I Wish I Had Better News

I recently attended an annual real estate conference where I learn about the current state of the real estate market. I’m referring to Single Family Residences (or condos) in Southern California. What did I learn? Well, this weak real estate market is far from over. There are over 4 years of shadow inventory. Shadow inventory is that group of properties that will eventually be sold after being foreclosed on by the bank.

Banks are controlling the flow, not allowing too much inventory on the MLS. Which may be the way to go, but it will take a long time to recover. There was also another interesting point. The Fed announced that they would be keeping rates low for two years, which told the public, “you don’t have to be in a hurry.” Lower interest rates have only encouraged buyers to wait. I doubt that is what the Fed had intended, but nonetheless, that is what we are seeing in the marketplace.

There are still a lot of foreclosures out there. There are so many people who bought at the top of the market. Many of them have stopped paying their mortgage because they owe much more than the house is worth. Many of these people have not yet received a “Notice of Default” from the bank. In a “normal” market, the bank would send a “Notice of Default” after 2-4 months of non-payment. Some people have not made payments in 2 years! And still have not received a “Notice of Default”. It’s crazy. But, the banks don’t want to take too many of those properties back at a time because they have to account for those losses.

It’s a false bottom. There is absolutely nothing positive on the horizon for the housing market. Hopefully, the worst is over, but it will be a long, tough, slow recovery.

 

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