The backlog, the trickle, and the market
On July 6th, Mike and Julie attended a one-day event sponsored by the Non-profit Association of Hispanic-American Real Estate Professionals (NAHREP) featuring a panel of Chase asset managers and REO division employees. Chase executives discussed their business model for selling real estate assets, their short sale process, and how they are positioning themselves to deal with a massive backlog of home defaults that they project will last at least through the next five to ten years. Eric Fisher, Assistant Vice President and Utah Home Lending Manager, cited 900,000 foreclosures nationwide in 2010, 26 percent of which have been processed. Chase is currently seeing 50 defaults for every 1 bank-owned home processed and listed as an REO. The backlog is, of course, directly related to the mortgage bubble and crash in the late 2000s, and the relatively slow rate of processing these foreclosures and short sales can be attributed to a number of factors, including government regulation, bank policy, and pressure from homeowners.
In other words, foreclosure real estate is not going anywhere anytime soon. The subprime mortgage crisis is looking increasingly like a sea change in how real estate transactions are structured in the US, and as banks, government, the real estate community, and home buyers respond to the aftermath, rapid change is the name of the game.
One of the factors contributing to the slow processing rate for foreclosures at Chase, Bank of America, and other banks is, of course, the market itself. Numbers all across the board are down, and that doesn't seem to be changing any time soon. Talk of the United States' looming debt crisis and its potential effects on the housing market indicates, if anything, that we still have a rocky road ahead of us.
One of the most dramatically hit segments of the housing market is custom/luxury homes over $500,000. To take an example, one of our Bank of America foreclosure listings in Saratoga Springs, at 186 E Lake Breeze Drive, was valued at $693,600 in 2007, and in that climate, county assessor values were often low. Today, the same property is listed at $499,900. Bank of America systematically prices its assets based on current market analyses and tries to be as accurate as possible. But the table below, which shows the market absorption and inventory for $500,000+ homes in Utah County, indicates that with a nearly two-year supply of these homes waiting to move, prices are likely to stay as soft as butter in a warm kitchen.
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