Shadow Inventory South Florida U.S.
As of 4th Qtr 2010 441,461 2,777,247
Share of U.S. Shadow 15.9% N/A
Months of Supply 28.8 12.0
More information on the OMB's geographic definitions can be found at http://www.whitehouse.gov/omb/inforeg_statpolicy/
A concern of many in the real estate field is the amount of inventory that banks have on their books, but have not yet released to the market. This shadow inventory consists of homes near default or already in bank possession, but not listed for sale. A large influx of inventory from this shadow population would place downward pressure on home prices. Bank representatives state that they are not holding back inventory. Statistical evidence suggests that foreclosures are often priced well below comparable non-distressed properties and move quickly after entering the market as a result.
The shadow inventory for South Florida is 441,461 properties which accounts for roughly 15.9% of the total shadow inventory for the United States. This represents 28.8 months of supply assuming that the shadow inventory sells at roughly the current rate of sales for foreclosed homes. For more information on how the shadow inventory was calculated, see the article "State by State Estimate of Shadow Inventory" by Economist Selma Hepp of NAR Research at http://economistsoutlook.blogs.realtor.org
After falling sharply in the second half of 2010, mortgage rates climbed in the 1st quarter of 2011. Strength from a variety of economic indicators including consumer spending, confidence and even housing led the 10-year Treasury higher. This pattern dragged the rate on the average 30-year fixed upward with the Treasury. As a result the spread between the 10-year and the 30-year FRM shrank.
This pattern is likely to reverse course in the 2nd quarter as fighting in Libya and uncertainty in Egypt have caused oil prices to spike. In addition, the tsunami and subsequent nuclear disaster in Japan impacted supply chains necessary for production by U.S. firms. The combined effect was a reduction in economic growth in the 1st quarter. This unexpected shock drew down expectation for economic growth and the 10-year Treasury. Mortgage rates have followed suit and were well below 5% as of May. Rates are likely to remain low in the near term, but are expected to reach 5.6% by the 4th quarter of 2011.
REO: Three letters every buyer today needs to know
What is an REO?REO stands for "real estate owned" property. If a foreclosed property is not purchased at auction, it is typically bought back by the lender. Although the lender is often a bank (the reason why REOs are frequently called "bank foreclosures"), credit unions, mortgage companies and other financial organizations can also lend money to purchase properties -- and foreclose on them if they need to. Since banks and other lenders aren't in the business of being landlords, they will often want to get REOs off their books as quickly as possible, creating some truly excellent opportunities for buyers.
Locating REOs- Check newspapers for ads from lenders and real estate agents listing REO properties.- While banks aren't required to release information on their REO properties, it is still a worthwhile venture to ask them periodically for whatever they can provide.- Network with and frequently contact the person who handles REOs for lenders.Who handles REOs?Some lenders will have a real estate agent or broker handle the sale of their REO properties, while others have one or more people, or even an entire department, internally handle them.Did you know?A foreclosure and an REO are the same thing -- but REO designates the end of the foreclosure process.5 things you need to know about REOs1. Unlike properties that are in pre-foreclosure or being sold at auction, lenders can profit from the sale of REOs. So, while deep discounts are often an advantage to purchasing REO properties, they should not be expected.2. Prospective buyers of REO properties typically do not have to worry about cloudy titles, back taxes or other surprises, since the lender will almost always take care of them before closing.
3. The condition of REO properties can range from horrific to impeccable, making it extremely important for prospective buyers to have them professionally inspected. TIP: Make sure your purchase agreement includes a clause that gives you a certain number of days to inspect the property. 4. REO properties are sold "as is," meaning the lender who now owns the property will not agree to fix any damages or deficiencies. Most purchase agreements, however, give the buyer a certain number of days to inspect the property and the rite to cancel the sale (or negotiate a lower price) if something they discover is not acceptable.5. Lenders typically accept less money down for the purchase of REO properties and will also often pay for closing costs and provide other incentives -- so be sure to ask!
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Allegra Garces Willis
Realtor
954-288-6667
allegra@thewillisgroup.com
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