Stopping Foreclosures NOT the key to recovery for Phoenix AZ real estate

November 24, 2008

Phoenix AZ real estate is near the top of the list of price declines. Not a great title. In fact, a recent RL Brown report shows that most parts of greater Phoenix AZ real estate have now declined past 4 year lows, retracing all the gains of 2004-2005.

Scottsdale AZ real estate prices and Phoenix AZ real estate prices continue to slide as a result of

Down payment are the problem; no one has cash these days. Or, at least, no one wants to part with it.

rising foreclosures.  In fact, last month foreclosures actually outnumbered resales amounting to more than 50% of all sales.

Now, must of the experts argue that until foreclosures, which drag down prices due to their steep discounted prices slow down , prices will continue to slide.  Nationwide, economists and politicians are doing everything they can to slow or even halt foreclosures.

The Housing Rescue Act is designed to stop foreclosures. Last week, Fannie Mae and Freddie Mac halted foreclosure for 90 days

to figure out how to modify loans in order to keep struggling homeowners in their homes and prevent more foreclosures.

The FDIC has proposed a plan to Congress that outlines details for loan modifications that will work with banks and lenders to prevent foreclosure.

So, it seems that stopping foreclosures IS the key to recovery for Phoenix AZ real estate. Right??

Well, yesterday, Craig Anderson, a highly talented and immensely respect writer for the AZ republic wrote a story disputing the above. Mr. Anderson cited a California foreclosure analyst and blogger, Sean O’Toole that “the biggest obstacle to market recovery could be rising interest rates” and “not the increase in foreclosures”.

I politely disagree. Banks do not want to lend because of falling home prices. Banks have to make mortgage products require larger down payments and higher interest rates to protect their loans that are less and less safe as prices continue to drop (due to foreclosures).

If foreclosures stop and prices stabilize, banks will feel much more comfortable offering loan products with manageable down payments.

In fact,with down payment requirements at 20% (for most people), they may even be paying less per month then a interest rate drop of as much as 1% on a 90/10% down mortgage or even a 955% down payment mortgage.

Bottom line, until foreclosures decrease and prices stabilize, banks will not ease credit.

I may even go out on a limb and say that Zero-interest rate policy (ZIRP) which has been discussed, would help some, but little. Banks could then lend below 2% on mortgage rates. Yes, buyers would be jump at the chance. Who wouldn’t ?? .

BUT, ….buyers would still need to come up with as much as 20% down payment. Think about it, 20% of a $250K home is still $50K!! Who has $50K that they can part with these days who wants to live in a $250K home??? These days, Very few!
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Copyright © James Wexler *Stopping Foreclosures NOT the key to recovery for Phoenix AZ real estate  *

If you are listing your home as a short sale in Phoenix Arizona or Scottsdale Arizona make sure you hire an agent who knows how to do short sales and has the experience to get the job done.

Call 480.221.8080 to find out more about Phoenix AZ Short Sales and Scottsdale bank owned homes

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Written by James Wexler · Filed Under Articles, Lending / mortgages 

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