Click to expand. [Chart via WSJ]
The talk of the season is how few houses are for sale compared to years past, but if you want to know the up-and-coming topic of conversation around real estate agent water coolers it is surely the topic of foreclosures. Washington did far better than the rest of the country when the foreclosures were at their peak, but there is another wave coming and it is going to look very different than the one we've just come out of. We managed to catch up with John Heithaus, Chief Marketing Officer of MRIS (the local multiple listing service), who shared a few thoughts on what is coming.
What follows is transcript of our conversation with John Heithaus. It has been condensed (but not too much!).
"I’ve been in the real estate market for thirty years and I’ve never seen anything like it. That’s what makes this such a compelling story. We’re still sitting on thousands of impending distressed sales. If you look at what Fannie and Freddie haven’t released to market yet, plus the Countrywide stuff that Bank of America still has, plus HUD and the other big lenders, there is a lot waiting to come on the market. Right now is the pre-shadow shadow. There are four ways the coming foreclosure wave is going to be different.
First off we’re going to see a different demographic of buyer. Before it was a lot of first time homebuyers who got sucked into mortgages they couldn’t handle. The next wave has people across more age groups who have defaulted on payments. That also means that the foreclosures in the pipeline are a at a higher price point than the ones that came through last time.
Since the houses are going to be more expensive and belong to a broader population of homeowners that means we’re going to see a wider geographic distribution of where these foreclosures are. Previously it was individual neighborhoods that got hit hard, but this time around the foreclosures are going to be everywhere.
Finally, this time around we are going to have much smarter lenders. They’ve already been through it and don’t want to make the same mistakes as last time. So they are going to be much tighter both on the appraisers and the people buying the foreclosures. Even if you’re putting down twenty-five percent with a good credit score that can be shaky territory."