California Foreclosure Moratorium Ends

california_foreclosure_moratoriumOn September 15, 2009 the California Foreclosure Moratorium officially ended.  The California Foreclosure Prevention Act (Assembly Bill X2 7) was meant to fore more banks to negotiate loan modifications and short sales with existing home owners in default.  Most major banks ended up getting exemptions from this plan, by jumping through certain hoops.

Does this mean the market will change and we will see a influx of inventory?

Big Picture Economists

I’ve read many different all seemingly logical answers.  So there is no consensus among the industry.  All the economists and big picture people say, there is a huge amount of shadow inventory that banks are in the foreclosure process with, or “sitting on”, but they are in no rush to release it.

Local Investors

Some local investors are arguing that banks want to keep prices up or stable and are slowly dripping inventory to the market to create increased demand.  This would seem logical as well, but if they have as much inventory as everyone is saying this method will take years to get rid of the inventory.  Short term it may be good for the banks, but if delays the hosing recovery it is bad for them, and bad for business.  As a smaller investors (limited capital) I would not mind the down turn being delayed as it will give us a chance to buy more inventory at the bottom (or near the bottom).

REO Agents

All the REO agents I have connections with, especially the ones in the bigger offices say that their asset managers keep telling them to wait and a massive amount of inventory is on its way.  But they’ve been saying the same thing for the last 6 months.  To give an example some of the big offices we deal with would get 40 listings a week, they are now do to under 5 a week.  REO World, who provides asset management services for banks has laid off about 20% of their staff in this down turn.  It really seems hard to believe that they would do this if an influx of inventory is coming…

The Wild Card

The one thing that no one can predict is what the government will (or won’t) do to jump start the housing market.

  • Renew the $8,000 first time home buyer credit?  There is a bill trying to get past right now to increase it to $15,000.
  • Pass another round of foreclosure moratoriums.
  • Force banks to do short sales or loan modifications.
  • Anything is possible with the government…

Our Game Plan

California really is a seasonal market, retail buyers buy from May to September and there is a lot less retail action in the California “winter months.”  The inventory we buy now for remodeling hits the market, 3 months from now.  So anytime we bought today would go for sale at the end of December (if we planning to sell it FHA).  We are cautiously buying flips, but being very firm on our pricing, we are buying a lot of rental properties (House #14, House #18, House #19 all are going to end up as rentals) and we are wholesaling some inventory.  We don’t mind carrying a little bit of inventory into December, but our goal is to buy most of the properties in January to  March and have them ready right at peak season.

If a ton of inventory does hit the market we probably will not see it until January anyways.  The foreclosure process takes 5 to 6 months. But I can assure you, it will be a fun year in Real Estate.

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