2012 has started with relatively good news for both investors and property managers of rental residential real estate. The most relevant breaking story came on Thursday, January 12th when we learned that foreclosure filings and repossessions have fallen to their lowest level since 2007 last year. Total filings, including default notices and bank repossessions were down 33% for 2011 to 2.7 million, according to RealtyTrac, the online marketer of foreclosed real estate. They informed us that 1 out of every 69 homes had at least one foreclosure filing during the year, while 804,000 homes were repossessed. That’s a significant improvement from the peaks reached in 2010. In that year 1.05 million homes were repossessed. So the numbers for 2011 are the lowest since 2007.
This apparently is the beginning of a nationwide trend, according to CNNMoney.com. They also reported that more than 4 million homes have been lost to foreclosure over the past five years. That’s a big inventory to add to the existing numbers of unsold homes, and that foreshadows a trend that will be more like a bottoming-out process on home pricing. While the declines in foreclosure filings and repos sounds like good news for the housing market, where a torrent of foreclosed homes has depressed home prices, “… much of it is due to processing delays caused by fall-out from the “robo-signing” scandal that broke in late 2010,” according to the CNNMoney.com report. “During the year, banks spent more time making sure paperwork was legal and proper, creating a backlog in the foreclosure pipeline. As a result, the average time it took to process a foreclosure climbed to 348 days during the fourth quarter, up from 305 days a year earlier” they pointed out. “Foreclosures were in full delay mode in 2011, resulting in a dramatic drop in foreclosure activity for the year,” said Brandon Moore, chief executive officer of RealtyTrac.
When I went to their web site I also learned that the average sale price of a foreclosed home actually went up 8.53% in December 2011 (nationwide average price–$183,393) from them November average price of $168,984. This gives a sense of urgency to your owner-clients who want to leverage what they own by looking for foreclosed houses that they can buy at greatly reduced pricing and rent to future residents. Remember, be the source of good ideas and news to your clients and they’ll not only stay with you, they’ll refer others to you!
Turning Foreclosures into Rentals
As I recently reported on this site, 2011 will go down in history as the year when the rental housing and multifamily apartment rental markets began to tip in favor of owners and landlords. Now comes the exciting news that Federal officials are planning to launch a pilot program in early 2012 to convert government-owned foreclosures into rental properties. The program, which was recently mentioned by Federal Reserve Chairman Ben Bernanke as one way to address the housing crisis, would sell foreclosed homes now owned by Fannie Mae and Freddie Mac to investors who want to buy in bulk.
Converting foreclosures to rentals will help many neighborhoods, relieve the shortage of rental housing and minimize losses to Fannie, Freddie and the FHA. These three Government-Sponsored Enterprises (GSE) hold about 250,000 properties, Bernanke told lawmakers in January 2012. He urged lawmakers to strengthen their efforts to improve the housing market. Dr. Bernanke is placing particular emphasis on the large number of vacant homes on the market. “Restoring the health of the housing market is a necessary part of a broader strategy for economic recovery,” he stated emphatically.
For more details about turning foreclosures into rentals you may want to check this out for yourself. This may be a once-in-a-generation chance for your clients to increase their rental property income and for property managers to expand their businesses at the same time.