(Article includes comments by Ann Stickel, VP of Affiliate Services for Michael Saunders and Company)
Photo Credit: DSNews.com
The Best of Times and the Worst of Times: The 2009 REO Market
By Rick ShargaIt wasn’t all that long ago that veteran REO agents and brokers were wondering if they should be pursuing another line of work. Through the early part of the decade, foreclosure activity was at below-average levels, properties that entered the foreclosure process seldom made it as far as the foreclosure auction, and properties that made it as far as the auction were generally purchased by eager investors. As a result, very few properties became REOs, and business for REO specialists was scarce.
As it turns out, that scarcity was driven by unsustainable home price appreciation, a voracious consumer appetite for real estate investments, a seemingly endless supply of fresh capital from Wall Street and institutional investors, and lending practices that threw caution to the wind. These same forces which, through the first half of the decade, kept REO activity artificially low, eventually led to an explosion of REO activity the likes of which the industry had never before seen, and which – unfortunately – it was ill-prepared to handle.
After seeing almost 201,000 REOs in 2005, the last year before the current wave of foreclosure activity began, REO counts have spiraled upwards at a remarkable rate: Over 268,000 REOs in 2006, almost 405,000 in 2007 and nearly 862,000 in 2008. In just four years, the volume of REO activity has more than quadrupled, far outpacing the servicing industry’s ability to deal with the volume. And 2009 is on pace to set another record.
Bank properties are no longer scarce, and they’re no longer a hidden commodity. In many of the harder hit markets, especially in states like California, Florida, Arizona and Nevada, it’s not unusual for bank properties to make up more than 50% of all existing home sales. In metropolitan areas like Stockton, CA and Las Vegas, distressed properties – primarily REOs – have accounted for as much as 85% of resale activities during the first six months of 2009. Consumer interest has never been higher, either. In a recent Harris survey conducted for RealtyTrac and Trulia, almost 60% of homebuyers said they were considering the purchase of a foreclosure property.
