MarketWatch: Housing crash is getting worse: REPORT

Scary sounding headline, right? And yet, how often do we hear this kind of talk in this day and age? It's almost like we are immune to it, and conveniently ignore it, worrying about today, rather than tomorrow.

In this blog post, I am going to attempt to draw out a couple of points out of a very well written article that I just read (full link at the end of the post).

1.      Real Estate is Location Specific.

From the article:

In other words, when it comes to distressed housing, I’m finding it hard not to be a contrarian bull.

Why? Am I crazy?

Well, maybe. But I’m a medium-bull for all the reasons everyone else is gloomy.

First, prices in many areas are now cheap. They have corrected a long way since the bubble began to burst five years ago. Of course, it depends on where you are. I’m still skeptical of the real-estate markets that have held up best — prime stuff like Manhattan, San Francisco or Beverly Hills. It’s hard to get a deal there. 

But in the places that have fallen the furthest, there are deals aplenty. Zillow found only four metro areas in America that have leveled out, or risen, lately. Notably, two of those are in stricken Florida — Fort Myers and Sarasota. Have they fallen so far they’ve hit bottom? Maybe.

This is very much in line with the point I was making last week in my commentary on the CNN Money Magazine blog. Sure the prices are coming down in areas that were previously considered to be "immune" to the downturn, and sure it looks like the declines are stronger than expected. But to say that this is true about some areas, is not to say it's true about all areas. As the author notes, some of the areas that were hard hit early on, have stabilized, and represent great opportunities, both in that it's cheaper to buy than it is to rent, and in that many of these homes make a great investment, with stronger than historically seen ROI's.

My personal opinion is that while the values in the Phoenix area may further decline in some locations (ones that have not seen strong blood letting), other areas (ones that were hardest hit) will remain stable, and even appreciate, as the demand for inexpensive housing continues to grow, and investor activity remains strong.

FWIW, I am actively buying Central Phoenix multi-unit properties for the incredible ROI the represent, and the strong rental demand in the area.

2.      Distressed Market Solutions are More Needed Than Ever

From the article:

Here in America we have “zombie homeowners.” Millions of them. According to Zillow, a record 16.3 million families are upside-down on their home loans. Sixteen million! And many are a long way upside-down. Their homes may never be worth as much as their mortgage. But they are hemorrhaging cash to pay the nut every month.

Recovery? What recovery? This looks a bit like a depression to me.

I remember when we were first doing short sales in 2007, many agents thought they were a market fluke that would pass before they have to do anything about it. While in the grand scheme of things, this may turn out to be a fluke, it is by all accounts, a decade or longer, type of a fluke.

Locally, it is estimated that as many at half of Arizona homes with a mortgage are "under water." The situation is dire no matter how you spin it. Hardship, the type that causes one to be unable to make their payment is also not exactly rare (and the national unemployment figures are not looking positive).

On the education end, we are seeing an increased demand for our Short Sale training in areas that have been historically strong - Oregon, Washington, Bay Area, etc. And if this is an indication of anything, it is an indication that the agents are seeing an increased demand for these types of services and are in turn getting their skills ready to be able to offer solutions.

By all accounts the HAFA program has not been as effective as originally hoped, but I don't believe that it has fully been played out yet. Only time will tell. Whether help will come from the government programs, or from the banks themselves, it is clear that these solutions will remain needed in areas that have been struck by price declines already, and will become needed in areas that will be declining in the next couple of years.

In summary, and in the spirit of this blog - now is not the time to panic. But rather it is the time to cut through the noise and to make educated decisions.  And if you are in the business, it is time to relentlessly work on improving the solutions that we are able to offer to millions upon millions of homeowners who need them. And if help comes from outside (government, banks, etc), we're happy to get by with a little help from our friends.

Read the full article here.