The Foreclosure log jam may be open..

RealtyTrac has a good video about the wave of new foreclosures coming down the pipeline. Minnesota has 2,403 New Foreclosures which is running about the middle of the road for the entire nation. Wisconsin posted 3,841 new foreclosures and Illinois posted 12,493 new foreclosures.

Time will tell… The shadow inventory is potentially large, but I am clinging to optimism that Minnesota’s judicial foreclosure system allowed us to clear much of our shadow inventory through short sales quicker than the other states. Which would in part explain why we have suffered some of the largest price declines in the nation to date. 



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3 responses to “The Foreclosure log jam may be open..

  1. I sure appreciate your optimism that the the flood of forelcosures not being as bad as the rest of the country due to short sales. But, as you point out short sales still have a negative impact on values, so what’s the answer? Because the inventory level of REO’s in many neighborhoods has seen a significant decline, many times below three months.

    • Blinding Optimism and Denial work well for me… I am only speculating that we have took part of our medicine, I think we are going to get hit with more foreclosures but not as hard as we otherwise would have or other areas.
      You are a seasoned industry veteran in Appraisals, what are you seeing out there? That has to be extremely difficult to appraise a house in a falling market, it is difficult enough to price one for the market but we Realtors have the luxury of adjusting pricing as the market dictates.

      Short Sales and REOs both bring pricing down, so there is no good answer at this point. We have to pay the price for not factoring Risk into mortgages during the boom. So we can do this one of 2 ways; quickly or slowly. It is kind of like when we were kids, do you pull the band-aid off slowly or quickly – neither is fun and without pain. I prefer the quickly option, get it over with rather than prolonging the pain. There is reason to believe that by prolonging this process, we are actually pushing values down even further as buyers are nervous that the prices will continue to decline so they are trying to buy for even less to price in that value drop – which will eventually create an over-correction in pricing. So in my opinion, we need to get government out of the way and let the market correct. Instead we keep injecting artificial policies that are only prolonging the market correction.
      To not go through this process, we would need to travel back in time and put the brakes on Fannie Mae and Freddie Mac from guaranteeing mortgages that didn’t have Risk priced into them. Unfortunately we have stifled the banks from factoring in risk and elevated Fannie Mae and Freddie Mac. In my opinion, we have not learned our lesson from this yet…

      • In my short 23 years in real estate (first as a Realtor) this is unprecedented. What little research on the S & L bailout I’ve done, it wasn’t nearly this bad. It’s kind of funny, we got a ton of legislation from that debacle that was supposed to prevent this from every happening again-ya right!

        Just like everyone down the real estate chain, every appraisal is more work. I still like what I do; I just don’t care for all of the nonsense that is taking place trying to prevent something that will most likely happen again.

        I really like your Band-Aid analogy, I couldn’t agree with you more. Let the system flush itself so we can start healing, uncertainty is killing us. When they did the tax credit a few years ago, which I was against, they said that would fix things. It did absolutely nothing to prevent the eventual decline in prices. I do a lot of REO appraisals and some of these prices are absolutely nuts.

        And yes, the saga continues…

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