Regular readers of this Blog will recognize a theme: government announces new rules or program . . . the blogosphere goes nuts with headlines and posts that the new policy is “bad for short sales” or “bad for real estate agents” . . . I write something ultimately concludes . . . “the government program in the end will not stop the market from doing what it needs to do . . . the market must correct itself . . . real estate investors are the agents of change . . . the market can’t correct itself without us . . . whatever government program will merely serve to delay the inevitable . . . there will still be more short sales than anyone could ever handle . . .stop whining and get to work” or something like that.
So today we get more evidence that . . . well, I’m right.
Moody’s Investors Service is forecasting another 8 percent decline in home prices during this year before the market reaches a bottom. They blame the increase in the “underwhelming” success of the administration’s Home Affordable Modification Program (HAMP).
The report highlights that not only is the bottom deeper than originally thought, but also future away in time. Previously, Moody’s predicted the floor to be reached in the third quarter of this year, but now they have extended that date until the end of the fourth quarter 2010.
Moody’s says the reason for the delay is the unimpressive number of houses successfully avoiding foreclosure through the HAMP program.
A decline in distress sales-including foreclosure, deed in lieu, and short sales-as a share of total home sales is a driving contributor to the gain in house prices.
The Moody’s report clearly suggests that a lack of successful short sales is part of the reason the market has not turned the corner towards recovery sooner.
While HAMP modifications have kept many houses from foreclosure temporarily, the report states that HAMP will “fail to convert to a permanent modification and will eventually end up on the market as heavily discounted distress sales,” Moody’s wrote. “It is looking likely that foreclosures will hit the market more slowly than we had anticipated, mitigating but prolonging the price decline.”
So . . . at the risk of saying “I told you so” . . . to the extent that a HAMP modification can buy a homeowner some time – good for the homeowner, but for someone in a house that is upside down that they can’t afford to keep making payments on – it’s short sale or foreclosure – one of the two.
And the best way for a seller to successfully sell their house through a short sale is to work with a team that includes an experienced real estate agent and an experienced real estate investor. Anything else and you’re just delaying the inevitable, bringing on more foreclosures, and pushing back the date that this market starts to recover.
So . . . if you’re still worried about some program taking away all the good deals . . . get to work. Apparently, according to some analysts we haven’t done enough yet!
