We received this excellent commentary from Joe Green with Synovus Mortgage. There are some other iterations online. Not sure of the original source, but this is very well said.
The pig is progressing through the python – the pig being the shadow inventory of foreclosures, the python being the market. According to Barclays Capital, there are currently 2.4 million loans in 90-plus day delinquency and another 2.1 million in foreclosure, totaling 4.5 million in shadow inventory. Barclays says that this inventory should reach the high-point this summer and then fall off, as the market absorbs an estimated 130,000 distressed properties per month. New foreclosures shouldn’t distend the market much further. Foreclosure filings dropped year-over-year for the first time since Realty Trac began measuring such statistics, in January 2005. Granted, we are dropping from monumental levels, but it is good news nonetheless. The aggregated numbers remain a little daunting, but it’s worth noting how foreclosure activity is measured. Realty Trac adds notices of default, notices of foreclosure sale, and actual foreclosures(so if a property goes all the way to REO, it will be counted three times) to arrive at activity. REOs are still at record levels, but the initial stages have declined substantially, which bodes well for the shadow inventory; hence, Barclays’ optimistic prediction that the worst, if not yet over, is close to being over.
All these bits and pieces of housing data eventually work their way into home prices, which continue to stabilize, as demand for higher-priced homes (driven by improving job prospects) picks up and the sale of distressed properties cease changing hands at deeply discounted prices. On that front, the number of metropolitan areas where median prices are rising grew for the fourth consecutive time. In the latest quarter, prices gained in 91 of the 152 metropolitan areas tracked by the NAR compared to 67 in the fourth quarter of 2009 and 30 in the third quarter of 2009. In short, we’re on the right path. But the farther we go down that path, the fewer deals we’ll encounter. A year ago, buyers were keeping to the sidelines because they were concerned with catching a falling knife – buying a home at $250,000 only to see a comparable property fetch $230,000 three months later. We believe those days are over,which is one reason we continue to implore those on the sidelines to get in the game. Mortgage rates are the other reason. Yes, the 30-year fixed-rate continues to bob around 5 percent while the 15-year fixed rate loan continues to bob around 4.5 percent, but they’re not sinking, and they won’t. Therefore, we see no reason for someone inclined to refinance or to buy a home not to, especially given the optimistic outlook on jobs and the economy and the continued expectation for higher mortgage rates.
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