What Does the October 2011 Housing Report Have to Say About the Real Estate Market?

First, there was some good news from the October 2011 housing report released last week.

The National Association of Realtors said pending home sales in October rose 10.4%, handily beating estimates of a 2% gain. Pending home sales are up more than 9% from a year ago.  Yahoo Finance gives an explanation for the increase in pending home sales being caused by the slide in home prices. According to Standard & Poor’s Case-Shiller home-price index, September prices fell 0.6% from August and are down 3.9% compared to a year ago. The index, a widely followed gauge of the housing market, measures prices in 20 major U.S. metropolitan cities.

Naturally, there is bad news.  CoreLogic, a data analysis company, released its newest figures on the housing market: 22.1% or 10.7 million homes with mortgages were underwater in the third quarter — that is, the amount owed on the home is greater than the property’s value. Last quarter was a slight improvement from the second quarter’s reading of 10.9 million homes underwater, but it still raises the possibility of more foreclosures to come next year.

In addition to the 10 million plus upside down homes, the bleak employment picture has also stymied a housing market rebound.  Americans need to sell their homes — in most cases below the purchase price — before relocating for a new job. For those who can afford to purchase property, banks have become highly selective when approving mortgage loans.

October 2011 Housing Report | The Fed to the Rescue?

So who will save the housing market?  Every government program put forth to prevent foreclosures has had no effect except getting us deeper into debt.  A bad rumor has it that the Federal Reserve will come to the rescue.  A Bloomberg news survey found that 16 of the 21 biggest bond dealers believe the Fed will buy $545 billion of mortgage securities — essentially another round of stimulus or “QE3.”  The Fed already has $900 billion of home-loan debt on its books, but a focus on buying mortgage securities instead of Treasuries is a marked departure for Bernanke & Co.

The effect of these actions have done nothing but increase wealth for the banks and decreased the value of the dollar.

October 2011 Housing Report | The Real Solutions

As the CoreLogic report stated, Americans with little or no or even slight negative equity must be able to sell their homes without letting those homes go into foreclosure.  The problem is that banks aren’t lending.  Unless the housing market stabilized, banks won’t be lending any time soon.  Fewer transactions means lower housing prices which lead to more upside down mortgages and thus, more foreclosures.  The only way to stop this downward spiral is to sell homes a market prices using alternatives to conventional bank financing.

The simplest solution lies in the Assignment of Mortgage Payments System, which allows ‘unsellable’ houses to be sold to ‘unloanable’ buyers at market price without government interference.   With the Assignment of Mortgage Payments System, a homeowner with no equity could sell their house by leaving the existing finance in place until new buyer is able to refinance.  The seller would not have to pay closing costs, which is a large factor in preventing foreclosures.  Many seller with no equity can’t afford to pay 7.5% closing costs on a $150,000 house and would prefer to let it go to foreclosure than write a $10,000 check to sell the house.

Learn more about the Assignment of Mortgage Payments System by watching this quick video:

The Assignment of Mortgage Payments System is a win for all parties involved as the seller is able to prevent a foreclosure, saving his or her credit.  The buyer purchases a house that he or she otherwise would not qualify for under these tough lending standards.  The neighborhood doesn’t lose housing value since the sale is at market price.  The banks and insurance companies continue to receive payments and the local government continues to receive property tax revenue.  All parties win when investors utilize the Assignment of Mortgage Payments System.

Let’s face it, the government, the banks, and the Federal Reserve’s policies got us into this mess.  It’s time for the free market to correct the situation by having real estate investors and professionals utilize the benefits of the Assignment of Mortgage Payments System.

If you liked ‘October 2011 Housing Report’, then you may also enjoy other articles written by Phill Grove, the REIMaverick.