Short Sales Will Continue Until Morale Improves

My 16 year old son recently discovered a saying that anyone who works for a living likely knows:  “The beatings will continue until morale improves”.  That’s how I see the real estate market – the short sales will continue until morale (unemployment) improves.  The Mortgage Bankers Association released it’s 2nd quarter analysis of mortgage delinquencies last week and 13.97% of loans are behind at least one payment or in foreclosure, foreshadowing continued strong short sale and bank-owned inventory in most regions of the country.

The continuing high level of delinquencies reflects the 2nd wave of pain washing through the real estate market.  Through 2009, the beatings were the resetting of teaser rate loans and the lock-up of credit in the financial system.  People who couldn’t afford the “real” payment on their house got in trouble in this wave of beatings.

Today’s new delinquencies are driven by the high unemployment rate.  Now homeowners who could afford their payment are falling behind because they no longer have the income to make their payments.  Until the economy improves significantly and unemployment drops below 7%, expect short sales (the beatings) to continue.

NAR (The National Association of Realtors) also reported that existing home sales dropped 27.2% in July versus July of last year to the lowest level in 15 years as overall inventories of existing homes for sale increased.  In related news, First American CoreLogic reported that California is one of the leading short sale states.

San Jose is not isolated from these trends and we continue to see short sales come on the market at a strong pace.  Expect inventories to climb in San Jose over the coming months as buyers are cautious and banks make it easier to short sell.

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2 Responses to Short Sales Will Continue Until Morale Improves

  1. Admin says:

    Sorry – we don’t have a Facebook page or twitter presence yet. I’ll post when we do get a presence set up. Thanks for reading!

  2. Short sales will continue until morale improves.. Corking :)

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