Oklahoma City foreclosure homes for sale are now hitting our real ...

Oklahoma City real estate and the business community is used to seeing good news about our city. In comparison to other metro areas over 1 million in population we are blessed with low unemployment, stable housing prices, and population growth. When the housing bubble meltdown started in 2007-2008 we were relatively unaffected compared to most. Yes our under employment spiked to 6% but the nations was in double digits. Yes we had a loss of value of 5% to 10% but other areas were 33% to even 80%, and ours also had to do with lack of access to new mortgage money. So we should be smiling, content, unworried by market forces right? I don?t think so and I am not predicting our own local meltdown either. What I am predicting is that Oklahoma City housing and it?s shadow inventory of distressed homes is just about to hit very soon and it has legs. I want to give you 5 reasons why we are so delayed in seeing this troubled housing inventory come on the Oklahoma City market until now.

Last in, last out: When the housing bubble burst in late 2007, Oklahoma City was in a different phase of the market. Bubble markets started seeing the snowball effect with the sub-prime market taking the values down and then like that snowball going downhill and picking up size, it rolled the prices below the prime mortgage borrowers and kept going from there. Because Oklahoma City was in a recovery state instead of being overheated we did not see these downhill forces at first. However, since we did have a combination of easy lending and a raft of second mortgages coupled to a higher unemployment rate, people who were laid off or had income reduced to keep jobs started to miss payments, and that leads to the second reason below.

Oklahoma is a judicial state: What this means is that we have a longer process to foreclosure. Let?s use 2008 troubled homeowners as an example. Say that the first missed payment was in July, and then 5 more payments are missed. We are now into 2009 and at this point the lender has to file with an Oklahoma judge the notice of ?les pendens?, which is where they officially file a foreclosure action, then they wait for a court date and if the judge says the papers are in order then they can start the foreclosure process. Now they have to go to a reporting period that typically takes another 4 months of publication and only then can they establish a sheriff sale date usually 6 weeks later, and then a confirmation date two weeks later because in Oklahoma we also allow the extra two weeks for a homeowner to bring cash a reclaim the home, so a best case scenario is now we are in the middle to late 2009. Now two things can make this extend, one is that the lender who is overwhelmed with foreclosures doesn?t get the home on the market after delays in the system until 2010. The other possibility is that the homeowner applies for a loan modification that delays the process, or their is a bankruptcy filing that temporarily?halts the procedure?and adds another 6 months or more, so now it is possibly late 2011, and if this happened in 2009 this year. Which leads to the next two problems below.

Robo-signing agreement: remember we were talking earlier about an Oklahoma judge ruling that papers were in order and this brings up two problems in the foreclosure process. First, the lender used a robo-signer that did not read anything and just rubber stamped the pages, and also the problem with the packaging of mortgages into derivatives and therefore creating confusion as to who owned the mortgage. This is where the US Attorney General with the states Attorneys General went ofter the big lenders, and these lenders temporarily shut down a lot of foreclosure action, and delayed future ones. They were concerned about liability and wanted to make the multi-billion dollar agreement before going forward. This meant that foreclosed homes were held onto and many?removed from sheriff sale until agreement was reached this year, and this represents a lot of homes that are the real shadow inventory sitting in the banks foreclosure department. I can tell you from jsut knowing homes foreclosed on 2 years ago that I drive by some I have targeted and they have not been listed for sale even today.

The LIBOR Scandal:?The latest lending debacle started with Barclay?s in England, that is now accused of manipulating rates that affect adjustable rate loans. Many loans with US banks were set to LIBOR, which stands for London Interbank Offered Rate. Even though this probably does not affect US mortgages that much compared to shorter term lending, US banks are being investigated by The Comptroller of the Currency and like the robo-signing scandal, this is holding up foreclosures hitting the market as this works itself out.

Mark to market accounting: This is where my education gets a bit amateurish, but simply put, once you mark down an asset like a foreclosed asset, you have to also make sure that your reserves can cover losses as that asset changes in value so here we have a bit more of a conspiracy theory. The theories are first, banks don?t want these assets to be marked down because it diminishes ready cash. The possible truth found in a clue is that banks like Bank of America are now offering large bonuses for homeowners to do short sales because a $10,000 payout as a bonus is still cheaper. Another conspiracy theory is that banks are holding these troubled assets off the market because with low inventory prices are going up just about everywhere, and that makes those foreclosed homes higher in estimated value. You can find anecdotal evidence to support this, but as I said, this is a conspiracy theory that may or may not be true, but it has possibilities especially when I talk to agents who specialize in foreclosure homes for sale by the banks and who tell me that hundreds of homes they will get are being asset maintained but not listed.

What this means for Oklahoma:?This will not mean a disaster that will kill values like in 2008, but it will mean that depending on normal equity homes for sale at the time we may have a small value loss. it also depends on how they will be released but if I am right then it will be like taking a time released capsule that is gradual. Again, to dump lots of homes on the market would not be a prudent economic decision. Yes banks can do stupid things we have seen in the last 5 years?but I don?t think they are that stupid. Here is for me the best news, this will be heaven for investors. Timing wise the investor market has moved away form the Phoenix and Las Vegas foreclosure markets. Phoenix is again doing well and if you bid on a foreclosed property in Las Vegas you compete with 40 other offers which bids it up. Those markets are also now over saturated with investment homes for rent and like 2004 rents are going down because?supply is high. In Oklahoma City we are not only under inventoried in rental homes, our vacancy rate is 1% to 2%, and rental rates are showing stronger appreciation that owner-occupant homes. If you are an investor that is my speciality and whether you are in state or out of state I will get you on a mailing list. You can email me at joe@joepryor.com. My next post will be on our rental market and how my full service team takes care of you.

Source: http://joepryor.com/2012/08/5-reasons-oklahoma-city-foreclosed-homes-sale/

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