2010 – the year of the bargain?

According to a foreclosure data service I subscribe to, there are 305 foreclosures in various stages of litigation here in Greenwich, with 193 of those initiated this year. I have looked at many – maybe most – of those properties and I don’t see any that are going to come out alive. By which I mean, the mortgage debt is greater than the current value of the house (I’m not talking about liens placed on houses for commercial disputes, but actual suits to foreclose a mortgage).

From anecdotal evidence, tales of friends of friends who, laid off, have been struggling to find a new job and failing, I’m afraid we’re going to see even more foreclosures started next year. Between those new actions and the concluding legal process for the earlier ones, I believe we are going to have a big chunk of bank owned housing to dispose of soon. Our current inventory, for instance, is around 585 single homes. Many of those are, of course, in trouble, but if we add another 350 distressed properties to that inventory, the results will be good for buyers, bad for sellers.

I’m far more pessimistic on this subject than many other realtors and I certainly wouldn’t panic if I were you – I could be way off here. But I do think that, if you’re holding your house off the market with the intention of selling it at a higher price next fall, you may want to consider either planning on holding on for another couple of years or getting out this spring.

That’s my two cents worth, anyway.

8 Comments

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8 responses to “2010 – the year of the bargain?

  1. Stanwich

    Is there overlap between what’s on the market and the distressed properties? I know it is probably difficult to tell given one number comes from the mls and the other from realtytrac.

    A lot of the froth has been taken off the market in the past 3 years of housing price decline. And the farther we go along in this correction, the more disparate the prcicing becomes, i.e., housing is no longer “at 2004 levels” but rather somewhere in a range of 1999 to 2003 and that range will continue to widen with time.

    This fall’s uptick in sales is a product of people seeing bargains, which took much of the more desirable housing stock off the market. The cycle will continue anew with more sellers seeing an out and buyers jumping in again. To say this market hinges on one single year or “selling season” isn’t telling the whole story.

    If you look at the last housing downturn as an example, we have surpassed 1991-1993 decline in terms of duration and % decline (but remember that the run-up in values was higher in 2006) according the Case-Shiller index. The recovery in pricing was long and slow so buyers are going to see lower prices for several years to come. You are right in telling sellers that holding out in hopes of higher pricing is an absurdity. The only thing people might want to hold out for is a market with increased volume.

  2. Resident

    CF What would you consider to be a healthy inventory number? Do you look at this as a total number of homes, or as a percentage of total homes? Thanks.

  3. Anonymous

    Hi..I may want to work with you?…all signs point to distressed opportunities abounding……what do you do when sellers ares still in what I call la la land?

  4. Greenwich Ex-Pat

    Ever since I discovered this chart, I have used it as my guide to how this will all play out. It has been eerily accurate thus far and note where we are in time on this chart and how it matches up to what is going on currently.

    http://www.oftwominds.com/blogaug06/post-bubble-symmetry.html

    Of course, it is always possible that Greenwich and its surroundings are different. Time will tell. I look for the real downward leg of the overall bubble to begin shortly after New Year’s, perhaps in February.

  5. Interesting (strike that) scary chart, Ex-Pat.

  6. XYount

    Crikey, G’wich Ex-Pat,

    I think your chart is right on the money.

    Back in the rah-rah 80s, I recall mentioning that house prices couldn’t possibly continue to escalate when salaries weren’t keeping pace. I’d point to prehistoric data like the Riverside house I grew up in that my father bought for $35,000 in 1950 (about 2 1/2 times his salary then) and sold for $125K in 1975 (about what he was making by then.)

    So, in his case, house value increased 3.5x over 25 years; salary increased about 10x over same period.

    That kind of ratio is no longer the norm.

    (Yes, my father made a better-than-average living, but even if his salary had increased a more modest 5-6x, the ratio of house value to salary would still be startling by today’s ratios.)

    Something is still seriously out of whack, starting with the re-inflated stock market — a bubble ready to burst early next year (when retail numbers et al. come out), because nothing but the hot air of a lot of serial gamblers getting their fix is holding it up.

  7. Greenwich Ex-Pat

    duff, xy, et al,

    As scary as that chart is, I think it is a useful tool. I don’t particularly follow Greenwich real estate as an expert, my experience with it has been what the family manse was purchased for back in the1970s and what it sold for 30 years later. Yow!

    However, my observational experience with Greenwich RE over the years has been that it goes up, falls back (though not to where it was), stagnates for a while, goes up again (wash, rinse, repeat). Correct me if I’m wrong, but my sense is that this has been the pattern over time.

    Greenwich may be different, but I’ll bet places like Danbury and surrounding areas will track with that chart, like much of the country. That can be a useful thing to know. Even in Greenwich, there will be hands bloodied by catching falling knives from now until 2014.