And Now For the Good News… Or Maybe Not

By Eddie Speed, Editor, REal Income Alert

According to RealtyTrac, September 2013 pre-foreclosure filings were down 38.9% from last year. The same study shows bank-owned REO (real estate owned) filings are down 25%.

The CoreLogic Home Price Index reports that nationwide home prices, including distressed sales, increased 12.4% on a year-over-year basis. That is the 17th monthly year-over-year increase. CoreLogic also reports that 1.7 million borrowers regained positive equity during the past year.

Certainly, this is all good news, right?

Well… it would be if foreclosure rates were down because more people were paying their mortgages.

Unfortunately, these filings are down for other reasons, including:

1) Banks are slowly leaking REO inventory back into the market so they don’t hurt their own sales prices.

2) Banks are selling the mortgage notes (i.e. the promises to pay the mortgage) rather than going through the cost and time of a long, drawn out foreclosure.

3) The Home Affordable Refinance Program (HARP) and other loan modification programs are temporarily keeping foreclosures lower.

Meanwhile, seeing a great opportunity for big profits, you’ve got cash buyers, large private equity firms and hedge funds swooping into the single-family-home rental market, scooping up properties left and right.

As a result, we’ve now seen 28 consecutive quarters of year-over-year inventory decreases. In fact, there’s just a just a five-month supply of new homes on the market according to the National Association of Realtors (NAR).

Here’s what that looks like…

See larger image

All of this activity is artificially inflating home prices.

While those price increases (although baseless) have erased negative equity for millions of Americans, the reality is that 9.7 million residential properties with mortgages still have negative equity.

9.7 million!

That’s an all-time high, at 19.8% of the total.

That’s not good.

So what’s going to happen when the banks and hedge funds start dumping their rental properties, as we know they will?

It’s basic supply and demand, folks.

We can expect to see property values fall again in the very near future.

The sad and simple truth is that we’ll not have a true real-estate recovery until first-time homebuyers enter the market in large numbers and new home construction moves higher.

That leaves you facing the dilemma of whether or not to invest in real estate. And if you want to invest, how to go about doing so. That’s why I’m preparing a Cash Flow For Life Webinar, which will be ready for you to watch on December 30. But you must register to watch it. Do so here now.

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