Foreclosures Lead to Gloomy UCLA Forecast
UCLA released the latest UCLA Anderson Economic Forecast today and ‘Gasp’ it shows that we are in danger of slipping into a recession. They are also expecting home prices to continue sliding. This is not a surprise for any of our investors - NCREI has been urging investors to prepare for the inevitable for the last few years. I sold my personal residence about 18 months ago to a zero down buyer - it is now in foreclosure, and priced about $100k less than I sold it for - and I can tell you I was desperate at the time to sell, because I knew what was coming.[googmonify]4494413162:right:250:250[/googmonify]
The markets are starting to price in an interest rate cut of 3/4’s of a point or more by the end of the year. Will the Fed’s come in and rescue us with the expected interest rate cut? The Fed’s are mum right now on what they are going to do - and it is not going to do a heck of a lot for us anyhow.
The interest rates right now are not bad - the problem is that few people qualify for them. With the lending markets continuing to implode, there are few institutional buyers for anything but top-rated loans at the end of the pipeline. Standards have been raised. Buyers need to actually prove income, heck they may even be required to have some money, but few starting homebuyers can put down 10-20% without help. Changing the interest rate is not going to change a buyers ability to bring $50,000 or more to close an escrow.
Prognosis: We have a long, bumpy road ahead of us, especially in California. Prepare for some rough times ahead, and if you are holding properties that you are trying to sell, get creative and use owner financing techniques to move the properties, or prepare to hold them till the next upcycle 5-7 years from now.
If you are really in trouble, remember you are not alone - we talk to investors every day that were caught in the credit crunch and are in trouble. You can give us a call for advice, or catch Sam at the next NCREI meeting where he will be the featured speaker, and will discuss what is actually happening in the marketplace, and your options if you are having trouble with your investment properties or personal residence.
Foreclosure and Short Sale investors - buy espresso in bulk. You are going to have plenty of work for the next few years.