This depends on who you ask. Real estate recovery is based on several factors. The overall economy isn’t always the main determining factor. In our current market, we have seen a significant decline in values, which isn’t necessarily unhealthy. Homes in our region are back down at the pricing we had in 2001. More people can jump into our market today because of low interest rates and a tremendous affordability factor.   I am seeing homes come on the market for $50K that sold at the peak for $220K and think “what was the appraiser thinking?” The unfortunate element is that whoever bought that home at $220K is now suffering from a foreclosure. They got caught up in the moment, like most did, of paying too much because that was the price and, besides, they could refinance their loan when it came time… well, the time came and they couldn’t refinance because the values had dropped too significantly. Or, perhaps they’d lost their job and no longer could afford the payment. Whatever the case, it is just one more home on the market in a sea of foreclosures and short sales.

Where are we today? That’s a good question! I subscribe to a website called foreclosureradar.com.   This is a fee-site that allows me, as a Realtor, to take a look at who’s in trouble with their mortgage. It tells me if someone has missed a payment, if they’ve had a notice of default filed against their home, and ultimately, if the home has gone back to the bank.    When I do a search of the Sacramento area, there are thousands (over 10,000) homeowners who are in trouble, yet our inventory is at the lowest it’s been in years. For some homeowners, they’re remaining in their homes without making the mortgage payment, just waiting to be offered “cash for keys” to move out. That’s right. Don’t make your mortgage payment for up to 18 months, and then ask for money to move… humm… I don’t remember seeing that option on my note. Another issue has to do with the bank trying to ‘modify’ the current loans that homeowners have. They’re forgiving a certain percentage of the balance on the loan and allowing the homeowner to work with them on the monthly payment. From what we’ve experienced, this isn’t a long-term fix. After just 3 months, the failure rate on these loan mod’s, as they’re called, is horrendous.

 In recent months, we’ve seen an uptick in prices in most areas. Why? Because there’s no inventory. Buyers and investors are clamoring at the chance to buy the REO’s when they come on the market. Multiple offers are becoming the ‘norm’ when it comes to the REO market. Banks price their inventory to sell, most times below market, and the price is driven up by the numerous offers that come in. It’s the issue of ‘supply and demand.’ Not rocket science. When you have hundreds, probably more like thousands of buyers that have jumped in the market, yet limited homes to sell… well, you see my point. Prices go up. BUT, is this recovery? Not yet in my book. 

Don’t get me wrong. It’s an excellent time to be buying. We’re literally seeing homes at less than half the price they were at the peak. Interest rates remain low. We may never see these low prices again in our lifetime. But, until we can flush out all of the homes that are in trouble, and people stop walking away from their homes, I don’t think we’ve yet recovered. The banks are controlling the number of homes they’re putting on the market. Instead of allowing them to flood the market, they’re dripping on one at a time. While the flood gates are backing up, we keep wondering, how long can they hold that inventory? That’s the million dollar question. Are we waiting for the other shoe to drop and those 10,000 homes to come on the market, pushing the prices down even further? Or, will the market continue on this same path for the next few years and ‘bounce along the bottom’?

If anyone sees a crystal ball at a garage sale, can you pick it up for me!