Many folks have heard about the National Mortgage Settlement, but few realize its potential affect on home prices right here in the general Pasadena area. This landmark agreement between Federal Government, Attorneys General and 5 largest loan servicers sets aside $25 Billion (yes with a B!) to provide relief to distressed homeowners.
The agreement has been highly publicized because it does the following:
- It sets aside money between $1,500 to $2,000 for folks that were foreclosed on where the paperwork was not filled out correctly by the banks.
- It sets money aside for the people that are underwater and not making their payments so that they can get a principal reduction on the house to help them hold on to their property.
- Homeowners that are making their payments on time, but are underwater may be allowed to refinance to make it easier on them to make their home mortgage payments.
However, what the main stream media is not reporting on is the fact that this settlement provides clear guidelines to the banks on how to proceed with the foreclosure process correctly and avoid situations like lender/servicer misconduct that caused the Robo-Signing scandal. The lenders had to put a hold on some foreclosures due to potential penalties for not processing paperwork correctly. This created a slew of homes, referred by many as “shadow inventory”, that have not been foreclosed on yet. Homes that many anticipated coming down the pipeline as foreclosures, but just did not make it all the way through the process.
Well… banks now have a clear understanding of the necessary paperwork and how it needs to be correctly completed for the banks to avoid further penalties. Thus, the floodgates will open and we’ll see this “shadow inventory” of homes foreclosed on and offered for sale.
What does this truly mean to the home sellers and home buyers in Pasadena? And, how will this impact our local home prices? It’s a simple matter of supply and demand. If there will be more homes on the market and the demand stays the same, we might see a downward pressure on the home prices.
Let’s take a look at the data that I just pulled –
On May 3rd, 2012, there were 368 homes listed for sale as reported in Pasadena Foothill Association of Realtors. An additional 486 homes in Pasadena are in some stage of foreclosure per Foreclosure Radar.
If these distressed properties hit the real estate market, it will more than double the existing inventory. Don’t get me wrong here. The inventory is sorely needed now. There are plenty of home buyers out there now and not enough homes. But, the potential numbers are staggering.
How quickly will the lenders proceed with foreclosure? Time will tell, but foreclose they will. There’s talk about some of these homes being held by the banks as rentals vs. being offered for sale as Real Estate Owned (REO).
So, if you’re a home buyer, it’s a perfect storm – interest rates are at historic lows and home prices are low and could potentially move a bit lower given the volume of distressed sales that could be available shortly.
If you’re a home seller, now is the time to price your home aggressively to sell it quickly. Pricing your home too high or waiting for summer months before placing your home on the market can backfire and cost you a lot of money.
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Thinking of selling your home? Interested in finding out the current market value of your single family home, condo or investment property? Then call Irina Netchaev at (626) 629-8439 to discuss what is happening in today’s Southern California Real Estate Market.