REO Pipeline Likely to Remain Full for a While
For all of you who are hoping to buy up an REO before the well runs dry you can relax just a bit. The latest numbers reported by Fannie Mae and Freddie Mac show that the number of foreclosed and pre-foreclosed properties is likely to go up despite the new Home Affordable Refinance and Modification program that is part of the economic stimulus bill passed by Congress earlier this year. Some homeowners are just too far behind for any kind of assistance to matter at this point.
Fannie Mae reported at the end of January that the number of single family homeowners over ninety days delinquent is up to 2.77% from just 2.42% in December. Freddie Mac reported a similar rise between January and February this year from 1.98% to 2.13%. In January of 2008 both of these mortgage giants had serious delinquencies at or less than 1%. Between these two government-sponsored entities there are currently over five trillion dollars in mortgages written for nine million homeowners.
If you do the math you can clearly see that there will be plenty of opportunities to buy REO properties at rock bottom prices, but that doesn’t mean you should put off getting a good deal right now. There are thousands of foreclosed and pre-foreclosed properties available today that are already being sold for far below what their market value will be in just a few years. An investment right now could lead to a huge profit in a relatively short period of time.
These new numbers will pressure mortgage companies holding real estate to sell as quickly as possible. Finance companies need liquid capitol, not property, if they are going to survive. Fannie Mae and Freddie Mac may be under government supervision but they still have to do business as usual. Their need to be solvent leads to an opportunity for you, the investor, to get a better deal.
The number of seriously delinquent mortgages and foreclosures is directly related to the rise in the unemployment rate, currently at 8.5%. Neither number looks like it will improve anytime soon but there are indicators that the recession is over. As Wall Street begins to make steady gains and sales of new homes and hard goods increase your window of opportunity as an investor begins to slowly close. The upside if you buy now is about as high as it’s going to be, so don’t wait.
In addition to the numbers reported by Fannie Mae and Freddie Mac, there are also over 1.5 million sub-prime mortgages that will reset to higher rates this year. These mortgages, typically targeted to people with less than perfect credit, will no doubt increase the number of REO properties that become available. Property values are still dropping in many areas of the country so the prices you can buy these homes for are getting lower, but not for long. Make your move now and you’ll be sitting pretty in a few years.
