Subprime Mess on 60 Minutes

For most real estate investors, the boom times of the past few years was fueled by easy access to money given by the big mortgage companies like Countrywide, Homebanc, and New Century. Money, as they say, flowed like water.

The “subprime mortgage crisis” has pretty much put a stop to that, and our real estate investor clients are finding new and different ways to profit in this challenging market.

60 minutes recently ran a segment which does a fairly nice job of detailing the relationship between simple homeowners, mortgage lenders, Wall Street, and international banking. It’s an interesting watch.

Some Things Never Change

Two pieces of not-very-surprising news today:

First: Foreclosures soared last year, with the numbers in 2007 increasing over 2006 by 75%, according to RealtyTrac. The December-to-December increase itself was 97%.

And it doesn’t appear that the foreclosure numbers will be getting better any time soon. First American Core Logic is reporting that the risk of foreclosure has jumped 22% from last January.

Second: The S&P Case/Shiller Home Price Index is out for November 2007, and it’s showing the largest year-over-year price decline on record.

Both the ten and twenty-city indices were down: 8.4% for the ten-city and 7.7% for the twenty. The 8.4 percent decline in the ten-city index is a new record low, smashing the previous record of 6.7%, set only last month.

Once again, home prices in Atlanta lost ground. The monthly drop increased from 1.2% seen last month to 1.8%. Year-to-year, prices declined 2%.

The largest drop was once again in Miami, which saw homes shed over fifteen percent in year-over-year value.

Hudson and Marshall Acution on CNN

CNN report on the recent REO auctions in Atlanta.

Atlanta Foreclosures Hit Record High

From the AJC: Metro Atlanta foreclosure notices in January hit a record 6,992 according to Equity Depot, up 45% from a last year.

One of the main culprits? Resetting interest rates of adjustable rate mortgages. And as subprime mortgage resets don’t peak until later in the year, the number of foreclosures, already at an all-time high, should increase.

This is not anything really new; we’ve been saying for months that the number of foreclosures is going to keep increasing.

For investors, as with much of the housing news these days, this is mixed news. On one hand, investors looking to sell houses are competing with these foreclosures, and as we know, prices are being driven down and it is becoming increasingly harder to sell property.

On the other hand, the opportunities for buying houses are unprecedented. Almost every property these days presents a short sale possibility. Hudson and Marshall is conducting cut-rate REO auctions. And with an unprecedented wave of REO properties coming, the number of opportunities presenting themselves to investors is only going to increase.

The Word of the Year

According to the American Dialect Society, the 2007 word of the year? Subprime.

w00t!

And in other news: According to the National Association of Realtors, pending home sales have fallen 2.6% in November, well beyond the 0.8% decline predicted by economists.

The NAR does not now see a rebound in housing until 2009.

UPDATE: The head of Fannie Mae is now predicting that housing won't recover until 2010.

Investor Alert: REO Auction

Hudson & Marshall, the country’s largest REO auction firm will be auctioning off more than 500 Atlanta-area foreclosure properties between January 15th and the 20th.

The auctions will be conducted throughout the state, though the great majority will be held in here in Atlanta.

A full listing of auction times, locations, and available properties is available on the Hudson & Marshall web site.

There are no minimum bids for the properties to be auctioned. Winners will be required to make a deposit of $2,500.00 or 5% of the bid price, whichever is greater. Buyers then should have 30 days to secure financing.

Estimated values of the properties range from $30,000.00 to $700,000.00 according to the Hudson & Marshall press release. Homes additionally come with owner’s title insurance, paid for by the sellers.

This is not the first REO action of Atlanta-area properties held by Hudson & Marshall, and a number of our clients who attended the first auction reported that properties were being sold at tremendous discounts.

For real estate investors looking at REOs, either as long-term holds or as quick turnaround sales, these upcoming auctions may present a tremendous opportunity to acquire properties at significantly below-market prices.