Dru Bloomfeld (At Home in Scottsdale) had a great post talking to whether the Phoenix real estate market will experience a “W” shaped curve (a second dip in the market that creates the shape of a ‘w’) or not given that banks and lending institutions are sitting on a lot more potential foreclosed home inventory than what is currently showing up in the market.
This has been a debate for the last 5-6 months in the marketplace as many believed that banks (including Fannie Mae and Freddie Mac) were gearing up to deluge the market with thousands of foreclosed home inventory.
In the end, the reader has to make up their mind as to what will come. However, I threw this counter argument up which makes more sense to me given the stability of the market over the past several months. Though I acknowledge that the stable market may in some sense be artificially stable, I wonder if this “artificially stable market” will become the norm. In other words, this market will go on for some time with all the manipulations for a long span of time and therefore become the new normal until we truly work past the issues facing the real estate markets nationally as well as other societal issues in general (that’s another topic I touched upon in an earlier post).
Here’s my comment for some perspective but definitely read the whole discussion (Get Out Your Real Estate Crystal Ball)…
“I agree with the numbers in that there likely are a lot of properties just waiting to be foreclosed. However, I am not sure about the timing of ‘delivery.’
If anything we have seen in the past 4-6 months of the Phoenix real estate, we have seen an artificially stable market in terms of high buyer demand, increasing sales year-over-year, and stable inventory.
This kind of environment supports a notion that large banks and associated lending institutions can manage the ‘bad news’ of foreclosures on the market and their earnings picture by limiting supply. As well, if they put more emphasis on short sales and letting more of these succeed prior to foreclosure, then they can further manage their ‘inventory pipeline.’
The hardest thing for a corporation is to have wide swings in its current earnings picture and outlook. So, my concern is that there would be more emphasis on a steady management of the problem even if it protracts it. More broadly speaking, the lenders and banks may also perceive that it is better not to deluge the market at risk of creating more short sales and foreclosures, reducing the values attained for the properties, and creating possibly a second downturn.
I don’t think anyone across the Financial Sector or Federal or State Governments really wants a second downturn even if they know it draws out the pain over a longer span of time.”
Feel free to share your perspective here for our local market or the market you may live in. We’d love to hear it.
Email this Post
