| Investors have been active in the foreclosure | | | | written off the bank portfolios, for the institutions |
| market for sometime. However, with the new | | | | that are cleaning them out. Therefore their |
| assistance programs going in place, expiration of | | | | economic effect is probably largely positive as |
| the first time home buy tax credit, and other | | | | banks realize some income and consumers move |
| macro economic factors, the investors should | | | | on to other housing solutions. In both cases, the |
| look closely at underlying factors and consider | | | | event results in greater economic activity. |
| their residential rental investment strategies. | | | | - Most of these foreclosures will occur after the |
| Rental homes may be the place to be. | | | | expiration of the new home buyer credit and the |
| The home foreclosure rate is heating up as banks | | | | credit will at most probably be reduced if it is |
| move to get these spoiled assets through the | | | | extended. I don't believe it will be extended as we |
| process. Combined with new federal efforts to | | | | have to clean house anyway. |
| save homes for home owners, legislation (HAFA | | | | From a basic application of economic factors, I |
| went into effect in April) preventing deficiency | | | | would expect the major results to be several: |
| notes on short sales, and other activities, the big | | | | |
| question is what will the market effect be over | | | | 1. Home prices will fall at least in the markets |
| the course of 2010. | | | | where the heaviest volumes are being written off |
| I see several key economic points to consider: | | | | and possibly broadly but modestly at this point - |
| - If the banks move to push homes through | | | | perhaps 5%. |
| foreclosure (and there are 1,000,000 homes or | | | | 2. Home purchasing will strengthen as conditions |
| more in this pipeline), the inventory of for sale | | | | favor investor purchases. |
| homes must rise. As it stands, this rise could be | | | | 3. Rent rates will stabilize and rental demand will |
| pretty strong. Additionally, the banks holding this | | | | strengthen. |
| real estate have little motivation to "hold out" for | | | | 4. Home improvement spending and contractor |
| a better price. | | | | work focusing on fix up work should be stable |
| - Perhaps the federal programs will work to some | | | | and likely will enjoy modest growth as foreclosed |
| extent so some foreclosures will be prevented. | | | | homes change hands and the new owners move |
| However, fairness is an issue as many owners | | | | to make them rent ready. |
| continuing to pay their mortgages won't receive | | | | I believe that by summer investors should expect |
| principal deductions. Too bad for many and good | | | | they are seeing the bottom of residential housing |
| news for a relative few. This however is really | | | | prices even though the workout of the glut of |
| not such an unusual economic consequence. | | | | foreclosed homes will extend through 2010, 2011, |
| - Signs are that employment is picking up and | | | | and into 2012. Now is the time to sharpen your |
| along with this, the economic position of the U.S. | | | | pencils, determine your market, and get started |
| consumer and economy as a whole is improving. | | | | acquiring assets. |
| - The foreclosures taking place are already largely | | | | |