As we get deeper into the busy summer selling season, all of the market and economic indicators we’re seeing point to a steady recovery that continues to march in the right direction. Although low inventory is posing a new kind of challenge, there’s another segment of the market that shouldn’t be forgotten: distressed properties.
CoreLogic reported that there were 52,000 foreclosures completed in April, the same amount as in March, but down about 16 percent from the same time last year. Overall, there are still about 1.1 million homes in some stage of foreclosure, CoreLogic found, representing a sizable amount of families who are in a bad spot. You might be seeing fewer short sales and REOs on the market too, but don’t think those struggling homeowners aren’t out there.
Another thing to watch: shadow inventory. In late May, the Obama Administration reported that 2.7 million borrowers have missed payments on loans backed by the U.S. government. Some housing experts have dismissed the role shadow inventory is playing in the housing recovery, but I don’t think it should be ignored.
With the government’s recent extension of the Home Affordable Modification Program (HAMP), which eases the burden of mortgage payments through loan modifications for qualified borrowers, some families will be able to stay in their homes. But many others who don’t qualify for the program—and are dealing with a long-term financial hardship—might be perfect candidates for a short sale, if they want to avoid foreclosure.
Keep this in mind, too: As prices rise in many major markets, homeowners who were previously underwater on their mortgages and are riding the edge of affording their monthly payment might be more open to a traditional resale. But it’s up to you to educate them about current conditions.
