Surf's Up! Get Ready for the Next Wave!

Here comes the next wave of foreclosures! The major banks have recently rescinded their moratoriums on foreclosures and Notices of Default are on the rise. In California in March default notices climbed to 33,178 up 80% from February according to ForeclosureRadar. The increase was driven by the expiration of lenders moratoriums that began in October 2008, along with the expiration of a Ca law that temporarily delayed default notices.
According to data from LPS Applied Analytics, in March 2009, 3.7% of all mortgages in the USA were 30 days late, another 1.5% were 60 days late, yet another 0.9% were 90 days in arrears and 2.55% were 120 or more days past due. A total of 7.7% of all mortgages in the country are late as of last month!
Many people who were hoping that the Obama mortgage relief plan would allow them to renegotiate their mortgages have discovered that they do not qualify; mainly because their loan was sold to investors who won't cooperate or because they are either unemployed or under-employed and cannot afford even a reduced-principal mortgage. Recent numbers show that only 10% of homeowners in some stage of foreclosure qualify for the Obama plan.
Nationwide there is a feeling that a new wave of foreclosures will cause home prices to fall further. In the local Hollister, Gilroy and Morgan Hill markets, prices at the upper tiers may indeed continue to decline as foreclosures set the bottom level of price. At the entry level, prices are already below the "magic" $430,000 price where buyers can qualify for a FHA loan and those historically-low 4.75% rates. I don't expect prices in this tier to fall any further as we are already seeing numerous examples of multiple offers and selling prices way above list price. One home in Hollister last week enjoyed 20 offers and sold $30,000 over list price! What is likely to occur is that nicer homes will sell easily and poorly conditioned properties will languish and may only sell when significantly discounted. Don't let the basic averages fool you- look at the selling prices for reasonably condition properties in your particular price range and track those trends. You'll get a more accurate picture of your segment of the market, not one influenced by the bopttom-feeding that will occur elsewhere.