Residential real estate has always been more of an emotional business than fact based one \u00e2\u20ac\u201c probably due to the fact that buying and selling a home ranks high on the stress list.\u00c2\u00a0 So the battle in a recovery is one of the mind more than the realities of the market place.\u00c2\u00a0 Reality shifts first and eventually the mind follows.\u00c2\u00a0 Here are a few of the fallacies we hear from both sellers and buyers and even more surprisingly agents (gasp!).<\/p>\n
Myth number one: The banks have a large \u00e2\u20ac\u0153shadow\u00e2\u20ac\u009d inventory they are waiting to release<\/strong><\/p>\n This is probably the number one falsehood that is bandied about at dinner parties and even by the media.\u00c2\u00a0 We have been hearing this rumor for years now and each year it proves to be unfounded.\u00c2\u00a0 What causes such a persistent rumor?\u00c2\u00a0 Our guess is twofold \u00e2\u20ac\u201c one, conspiracy theories always rise over fear.\u00c2\u00a0 When something seems out of control or unpredictable it seems that human nature forces an invention of \u00e2\u20ac\u0153facts\u00e2\u20ac\u009d when the facts seem unconfrontable or unknowable.\u00c2\u00a0 Secondarily, the argument\u00c2\u00a0 for shadow inventory arises due to the \u00e2\u20ac\u0153reported\u00e2\u20ac\u009d foreclosure numbers vs. the foreclosures that can be traced through resale methods.\u00c2\u00a0 Because the \u00e2\u20ac\u0153reported\u00e2\u20ac\u009d numbers are so much higher than the foreclosures that can be traced, it prompts the belief that the banks are strategically holding back\u00c2\u00a0 a \u00e2\u20ac\u0153shadow inventory\u00e2\u20ac\u009d.\u00c2\u00a0 The fact of the matter is that reporting methods for foreclosures are routinely filled with errors. \u00c2\u00a0Here are just some of the errors that lead to the erroneous belief that a shadow inventory exists.\u00c2\u00a0 Some properties have multiple lots with only one home, but are reported as if each parcel was a foreclosed home.\u00c2\u00a0 Some reporting sources count the notice of default as well as the actual foreclosure – which alone doubles the number of \u00e2\u20ac\u0153foreclosures\u00e2\u20ac\u009d.\u00c2\u00a0 Even worse are the sources that count each notice of default as a \u00e2\u20ac\u0153foreclosure\u00e2\u20ac\u009d \u00e2\u20ac\u201c which is ludicrous considering that ten notices to the same house (and believe me delinquent homeowners usually receive at least 7 certified notices of default) does not equate to ten foreclosures.\u00c2\u00a0 One delinquent homeowner is still one foreclosure \u00e2\u20ac\u201c even if ten notices were sent!\u00c2\u00a0 Also, notices of default are sent to homeowners who are mid-modification or mid- short sale.\u00c2\u00a0 These are often resolved without foreclosure \u00e2\u20ac\u201c but are counted as a \u00e2\u20ac\u0153hidden foreclosure\u00e2\u20ac\u009d.\u00c2\u00a0 The examples of errors are numerous \u00e2\u20ac\u201c the point being this is often behind the reporting of hidden inventory.\u00c2\u00a0 Recently a Wells Fargo local representative confirmed publicly that Wells \u00e2\u20ac\u0153has no shadow inventory\u00e2\u20ac\u009d.<\/p>\n Myth number two: Prices are still dropping\u00c2\u00a0 <\/strong>This is not only untrue, the opposite is true \u00e2\u20ac\u201c overall the Valley home prices are rising and rapidly.\u00c2\u00a0 Yes it is going to take time to dig out of the hole from the crash of 2007-2011, but the recovery is underway.\u00c2\u00a0 The luxury market and the 55+ communities did not see the same level of drop in pricing and therefore are not experiencing the same leap in pricing as we are seeing in the lower price ranges.\u00c2\u00a0 But as inventory levels are lower than demand, pricing is moving upward.\u00c2\u00a0 We expect this trend to continue through the year at least.<\/strong><\/p>\n Interest rates will stay low forever because the government will make it that way<\/strong><\/p>\n Yes, there are people who believe this even though there is no basis in fact for this idea at all.\u00c2\u00a0 In the first place, long term rates (10 year bonds and mortgages) are not \u00e2\u20ac\u0153set by the government\u00e2\u20ac\u009d in any way, shape or form.\u00c2\u00a0 The government can\u00e2\u20ac\u2122t control these long term rates (up or down) even when they have tried to do just that.\u00c2\u00a0 The government (via The Federal Reserve Bank) sets short term rates.\u00c2\u00a0 Overnight rates \u00e2\u20ac\u201c the rates that bank charge each other.\u00c2\u00a0 Not long term rates at all.\u00c2\u00a0 The \u00e2\u20ac\u0153rental rate\u00e2\u20ac\u009d for money (current interest being charged) is set by the market \u00e2\u20ac\u201c supply and demand.\u00c2\u00a0 Money is a commodity.\u00c2\u00a0 How much it will rent for is based on how much is available and how great the demand is at that time.\u00c2\u00a0 Long term rates are \u00e2\u20ac\u0153regulated\u00e2\u20ac\u009d, if you will, by what investors believe<\/em> is going to happen with future inflation.\u00c2\u00a0 So what does this mean to the homeowner?\u00c2\u00a0 Our belief is that the currently low interest rates will not last indefinitely.\u00c2\u00a0 This is a signal to buyers and the move-up seller to pull the trigger on any purchase sooner rather than later.\u00c2\u00a0 Interest rates will impact the monthly payment for a home far more than minor pricing fluctuations.<\/p>\n Arizona is one of the top 10 states for delinquent loans<\/strong><\/p>\n A couple years ago this would have been true as Arizona was number four out of all the states for delinquency.\u00c2\u00a0 Now Arizona ranks at number 33 \u00e2\u20ac\u201c and our delinquent loans are now at only 6.6% (compare that to over 12% in February of 2010 when we were number 4 in the country).\u00c2\u00a0 In fact, our delinquency ranking is the most improved in the last 2 years, another signal that recovery is underway.<\/p>\n So again, we stress that our market is in recovery.\u00c2\u00a0 For sellers this is good news; the home that once may have felt like an anchor dragging down homeowners, may be on the road to becoming an asset again.\u00c2\u00a0 If you have been waiting to sell, feel free to contact us to see if current pricing allows that to become an option for you once again.<\/p>\n Thank you as always to Michael Orr of the Cromford Report and our loyal friends and clients.\u00c2\u00a0 We are better for you in our lives!<\/p>\n","protected":false},"excerpt":{"rendered":" Residential real estate has always been more of an emotional business than fact based one \u00e2\u20ac\u201c probably due to the fact that buying and selling a home ranks high on the stress list.\u00c2\u00a0 So the battle in a recovery is one of the mind more than the realities of the market place.\u00c2\u00a0 Reality shifts first 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