July 13, 2024


Mad about real estate

REO Agents Bracing For Wave of Deluxe Foreclosures

Copyright (c) 2009 Frank Patrick

Million-Plus ?McMansions? To Be Next Big REO Listing Category

Up until now, the middle class has been hardest hit by plummeting home prices and a bad real estate market. This has resulted in massive mortgage defaults, the tidal wave of foreclosures and the historic high number of REO listings available.

The upper middle class and high-end homeowners who thought they would be able to dodge the foreclosure bullet now appear to next in line for foreclosures. Most of them who needed to sell have been counting on renting out their homes for a year or so ?until the market comes back? ? while burning through their own personal capital at an alarming rate.

The truth is, even with prices off an average of 30{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4}, home prices are still too high. The recent good news about improved sales has everything to do with agents and sellers giving up and not much to do with buyer interest. REO properties are definitely a hot commodity now ? because of their price, they?re seen as a deal and a great investment. The rest of the activity is mostly due to desperate homeowners willing to deal and short sales.

You can blame growing unemployment and economic stagnation for the real estate market (aside from REO homes) continuing to languish. There?s just not a lot of cash or credit around ? and that means we have yet to see the bottom of the housing market. And that also means a lot of homeowners holding big mortgages on million-plus properties who are waiting for a big real estate rebound are only going to be on the receiving end of big, big disappointment.

Looking at the most recent housing data from Orange County, California, home to a huge number of ?McMansions,? it?s clear that lower and mid-tier housing has stabilized to some extent, with inventories finally shrinking. But what?s also clear is that the higher end homeowners aren?t accepting the costly reality of the current real estate market.

Look at the numbers and judge for yourself:

? Homes priced at under a half million will take about 6 or 7 weeks to sell

? Homes from $500,000 to a million will take about 10 to 11 weeks

? Homes over a million ? over 13 months

What that means is that, with the economic picture as it is, most million-plus properties simply won?t sell in the timeframe most owners require them to. Many experts agree that these larger properties are currently overpriced by as much as 50{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4}. That foreshadows a price collapse in this market tier identical to that which hit lower end housing ? where the huge REO property boom has been focused so far.

For REO agents, brokers and contractors, this means more desirable listings, higher profits and more work.