Short Sale Economic Outlook

­­While the economy is muddling along, there are Real Estate, Mortgage, and Investors that are taking advantage of market needs. The Commerce Department said that the economy expanded at a 2% annual rate in the July-September quarter, which marks an increase in the previous 1.7% growth a quarter earlier. Historically this is a very slow growth rate however; it is the biggest quarterly increase since 2006. Note though that savings rates have increased to 5.5% of disposable income, up from 1% before the recession. Growth in GDP isn’t expected to improve, and assuming that the rate doesn’t drastically improve, neither will the unemployment rate.

What does this have to do with Short Sales you may ask? For starters www.shortsaleriches.com explains that although lending standards were eased in July 2010, the FED has reported, after surveying loan officers at 77 banks, that smaller banks have tightened their standards for traditional mortgages. Larger banks reportedly kept most of their lending standards the same. Just to recap the economy is slowly growing if it is growing at all, leading to an unemployment rate that is stagnant and slightly rising at 12.4% (according to www.bls.gov/lau/)as of September 2010.

According to www.shortsaledailynews.com the short sale market presents a golden opportunity. Five good reasons are cited as reasons to stay in the short sale market. First there is a ‘shadow inventory’ or inventory of eventual foreclosures due to large lender slowdowns because of investigations and shady practices. Second SB 931 signed by Governor Schwarzenegger now protects California short sale homeowners from lenders going after deficiencies following settlement. These investigations and fraudulent practices are providing favorable circumstances for sellers as approval times shorten and lender cooperation soars, with more legislation likely to come. Third, homeowners notice these changes and are beginning to recognize short sales as a viable option. Fourth, the process has been streamlined making lender response more favorable. Last, if you are a seller remember that you have a bit more leverage, demand for most real estate transactions is down while short sale demand is down. You can get a better price if you realize that agents are looking for sales.

So think double dip recession when considering your short sale options. What I mean here is that the inventory of foreclosures is on the rise, you as a seller, or agent needs to understand that from an agent perspective, there are a lot of potential sales to be negotiated. If you are a seller realize that you should try to augment your savings to avoid foreclosure/ short sale situations, but know that if your situation requires a short sale there are many agents that are willing to help so leverage that supply and demand structure such that you get good terms of sale, aka better price rates.