In Savannah, Georgia, 11 community banks hold about $97.5 million in repossessed real estate, and they are keeping local real estate agents who specialize in foreclosure pretty busy[1]. However, while you would probably expect this article to be about how that market is just barely pulling through, in reality the statistics on these REO properties are quite surprising. Contrary to the media blitz that tells us that once a property actually goes through the foreclosure process is disappears into the slag of the foreclosure tsunami to drag down the housing market forever, some of the numbers are not so bad. For example, most of these properties are remaining on the market – from listing to closing – for an average of around 100 days. Additionally, 15 percent of the sales are cash sales and another 5 percent were financed through alternative methods of financing. Landlords and wholesalers are active in the area.
Local Realtors report that investor-targeted properties get action quickly, with two to three offers coming in fairly fast in these instances.
It seems to me that scenarios and statistics like this simply further the argument that the real estate market must be left alone and allowed to tank, if necessary, in order for it to ever recover. However, in his town hall meeting yesterday, the President stated that this economic strategy made the people living in those foreclosed homes “just numbers.” Given the new prevalence of flexible financing and the move in the rental market to make homes available for lease-purchase or long-term, productive rental, do you think that letting the real estate market heal is too heartless to bear?
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[1]http://savannahnow.com/exchange/2010-09-21/foreclosures-repossessed-homes-still-flood-market
Capitalism and Markets- In a truly “Free Market” system. The Market
takes care of itself, up- down- sideways whatever. Just think about
how much better off we would have been without BAILOUTS !
Which is exactly what should have taken place.
“However, in his town hall meeting yesterday, the President stated that this economic strategy made the people living in those foreclosed homes ‘just numbers.’ Given the new prevalence of flexible financing and the move in the rental market to make homes available for lease-purchase or long-term, productive rental, do you think that letting the real estate market heal is too heartless to bear?”
Both the President’s comment and your are loaded statements. In a way, he’s correct that many businesses servicing the foreclosures have reduced those people to numbers in our calculations. However, what he failed to acknowledge is how many investors are standing in the gap to help transition many of those people from foreclosed homes to rentals and ultimately back to homes that they actually could afford.
Yet, your question went to the other extreme. Although you’re correct about the flexible financing options, rentals, etc, the implied hypothesis of your question–when taken in context (as a contrast to the President’s comment)–appears to be that taking a social (hence non-numerical) approach to resolving the issues isn’t business savvy and won’t work.
This doesn’t have to be an either-or set of issues. I find some merit in both approaches. We need to forge a hybrid solution together. You’re absolutely right that if the solution doesn’t make any fiscal sense, then we’re all wasting our time and other resources. On the other hand, he’s right about us needing to address the social issues too. Frankly speaking, dissolving Fannie and Freddie soon (within 6-12 months) needs to be part of that solution, because they were–and still are–a major source of all of the problems.
The investor community and our government are both guilty of rejecting externally produced solutions. Our dysfunctional Congress has been acting as if it knows how to run businesses better than the actual businesses do, and many business leaders have been carrying on as if they know how to implement federal law, policy, and/or tort better than Congress does. Both viewpoints are equally arrogant and wrong.
I’ve seen how some investors (myself included) partner with various non-profit and government agencies in Atlanta, Cleveland, and DC to help provide low income housing. Solutions like these are both fiscally and socially responsible. Yet, many mid to high income earners have also been displaced from their homes as a result of this foreclosure crisis, and they also need to find homes. Here’s an area where many non-profits and the government drops the ball, because they tend to focus most of their efforts on addressing the needs of the low income earners. That creates an opportunity for us investors provide our unique solutions (ie lease-options, rentals, land contracts, etc) to help fill this gap; this also is fiscally and socially responsible.