Welcome to the first article in a series of articles about real estate and the real estate market in the Coachella Valley. Many CV Weekly readers will recognize me as the “JeKKeL” Dad as I have spent most of my free time over the last 15 years as the #1 roadie and fan for my kids punk/rock band JeKKeL. But for those who know me professionally, I am the Broker/Co-Owner of La Quinta Palms Realty and I have spent over 30 years educating and helping buyers and sellers to realize their real estate goals.
Real Estate is one of the three essential requirements for human survival (food, water, and shelter). And whether we are buying, selling, renting or losing our shelter, and since it is the single largest investment that nearly all of us will make over the course of our lives, it just makes sense that we all try to learn as much as we can about real estate. To me, the one thing that distinguishes the content of CV Weekly above and beyond all other free weekly papers is its commitment to educate its readers to more than just the local music scene and current events. This series of articles will honor that tradition and hopefully provide you with the knowledge and valuable information that you can use to help you make good decisions to enhance such an important part of your life.
REO’s, short sales, loan amortization, discount points, escrow, MIP or PMI… real estate clearly has its own language and so learning the vocabulary is half the battle to understanding any real estate transaction or real estate market. Each article in this series will likely introduce you to a new words and concepts which will be explained and then applied to the real world around us. This week we will start with REO’s.
Simply put REO stands for “Real Estate Owned” by banks or financial institutions. We are not talking about the actual bank buildings here, but rather the real estate that banks or institutions have acquired through either a voluntary surrender of the property “in lieu” of having the property taken away through the foreclosure process, or by the property actually going through the foreclosure process and ending up in the bank or institution’s ownership. Future articles will cover the foreclosure process itself but for now suffice it to say that REO’s, foreclosures, bank owned, even the term Bank Repos all refer to real properties that at one time had a loan on them and then due to the failure of the owner to make their monthly loan payments are now owned by the banks or institutions that made or insured that loan.
While REO’s can be any form of real property (houses, condos, apartment buildings, commercial and industrial buildings, even raw land) most of us have been affected one way or another by the record number of single family homes and condos that have become REO’s since 2007. While millions of families have lost their homes with the “bursting of the housing bubble”, many more millions have seen their equities and net worth cut in half or even worse have found themselves owing more on their mortgages than their home is worth if they tried to sell it today. This negative equity is often referred to as being “upside down” or “underwater” on your mortgage. And let’s not forget the devastating effect that the REO’s have had on our construction and construction related industries almost completely shutting down construction of new homes for the last 5 years! The real winners at this time are those lucky buyers who are able to take advantage of the low prices and purchase their first home, an investment property, or even upgrade to a larger or higher quality home.
The question that I am most asked today is “When will the real estate market get better?” My answer is that it is a quick trip down when you fall off a cliff, but it takes a longer time to climb back up to the top. There is a lot of evidence that we are finally on our way back up but it is going to take a while. A little over a year ago REO’s represented over 50% of the houses listed for sale on the market. According to First American Title, REO’s make up only 4.5% of the listings for sale today in our area. Home prices in the Coachella Valley are up between 10% and 20% over the last 12 months. In many areas, particularly in the lower price ranges, we have returned to a seller’s market where there are more buyers than houses available. This results in higher prices and multiple offers on every listing that comes on the market. There are even signs of new construction taking place around our valley and even more projects in the planning stages for construction of new housing tracts in the near future.
Yes there are positive signs of recovery all around us, but there are still many concerns that we may not be out of the woods yet. According to Fannie Mae (no, not your aunt Fannie, the Federal National Mortgage Association) there are still approximately 9,000,000 home owners that are underwater on their mortgages and of those approximately 4,500,000 that are more than 2 months delinquent on their mortgage payments. (To put that number in perspective, over the last few years the total number of homes sold in the US has been around 4,500,000 homes per year) At one time this was considered the “shadow inventory” that was supposed to double dip our “recession”. So why haven’t these homes come on the market as REO’s and reversed the current recovery? The answer can be found in the coming issues of CV Weekly where we will learn about loan modifications, short sales, the Home Owner’s Bill of Rights, and the Big 5 Bank’s Settlement Agreement.
Bruce Cathcart is the Broker/Co-Owner of La Quinta Palms Realty, “The Friendly Professionals” and can be reached by email at laquintapalms@dc.rr.com or visit his website at www.laquintapalmsrealty.com.
