As most of you know, we have the next foreclosure wave, which I talked about two years ago. This Foreclosure Wave is not one to ask "what next?" but was expected.
My observation was the first round was basically the abuse of the banks loaning money to borrowers who couldn't afford the home anyway or had a no or low down payment.
The next round, is what I would call the Wave of the Economy Foreclosure where a lot of people lost their jobs, or had significant reductions in income and getting a Loan Modification or reduction of interest in place, was hard to obtain, yet, some were successful because they kept going back and back and back until they got the answers.
This wave, is what I would describe as an lot of home modifications that didn't pan out because the left hand didn't know what the right hand was doing or it either waned on the homeowners.
Here's what has changed in the last five years of this economic upheaval:
1. The process has been simplified but it doesn't mean that those on the other end of the phone still are not nice or have a system that really works like a well oiled machine;
2. Banks are stepping up foreclosures
3. Consumers are not freaking out as much and taking the bull by the horns and saying "hey, this is a good time to buy or invest." and those who still may loose their home: "because of more information out there for those in distress to be empowered, helps the homeowner and so now, they pretty much won't take things sitting down anymore." - Good for them!
4. Banks realize that they have to do repairs and renovations to keep home values closer to non-distressed homes that they are competing against instead of enticing: "what a great deal with all it's problems syndrome."
Overall, the buyers are out there and are informed and just won't take any old home, sort of speak, because it's a great deal. Great deals come with a hidden price tag due to issues of unknown conditions and hence, when compared to a non-distressed home, in the past, it really wasn't a great deal to some.
Remember, banks weren't in the business of managing real estate. So, they had no guidelines from which to work with when it came to hold inventory. It reminds me of the movie, "Baby Boom" where Diane Keaton inherits her cousins child and has no idea how to care for nor has ever held a baby. The perfect illustration was when she went to the store to get diapers for this cutie pie and put her on the produce scale to find out how much she weighed to get the right diaper. Yet, when she gets home, she has no idea how to change the diaper and in the end uses electrical tape and wraps it around this cutie, because she damaged/destroyed a good many diapers trying to figure out how to get them on. This is pretty much what the banks went through but for worst reasons. Granted, they were part of the problem, as I can sense some will still fume over this, but the bottom is, they are not great managers of real estate.
Different regions will be hit and Illinois is one of them as we were "late bloomers" in the financial crisis as from what I could see in the data that I have been looking at and the bankers that I have conversed with over the years, is that those illegal practices were still ongoing, here in Illinois. Well, that and the fact that there were alot of pending new construction condos and some bought on speculation, which is another story for another day.
At the end of the day, it all boils down to being wise and investing in real estate. Warren Buffet mentioned that if he could he would be buying a lot of single family homes because it is a good long term investment, but one has to take into account this man is now 82 years old and long term isn't 5 - 10 years.
The rule of thumb is: Stop trying to keep up with the Jones' as they were broke to begin with and lived off credit and just set up a financial plan for your life and live within your means.
Goals need to be specific and have dates tagged on to them. And finally, my grandfather used to say "that a home should be paid off in seven years" My rebuttal is: while you have the thought and mindset to do a 30 year mortgage and think that you will and can make that extra mortgage payment instead of a 15 year mortgage, prove me wrong, because HUD says that 97.3% of you have failed making that extra payment on your 30 year mortgage.
You're riding out the storm even with one of the nations highest months of inventory for real estate.
One final story: This one will pretty much tell you how old I am but with age also experience, (I hope) follows with age: Chrysler stock as down to $5 a share and my brother and I discussed whether or not it was a good risk to take. Well, Lee Iaccoca came into place and the rest is history. It is about doing your homework but the bottom is, we pretty much are at the bottom and the only place we can go is up.
My thoughts about the Federal Government re spending: How can spending be increased when most of us were spending more then we were making? We have to live within our means. It is about jobs - keep them in America, please.