Between chaos and order
Chances of keeping a distressed home are up, but real estate’s wild ride is far from over
By Joanna Beresford 03/26/2009
“UK researchers are offering new evidence that the human brain lives ‘on the edge of chaos,’ at a critical transition point between randomness and order.”
World Science, reporting on recent study published by PLoS Computational Biology
In my opinion, this finding is optimistic — almost redemptive — when we consider current financial environments in general and the real estate market in particular. If our brains are biologically prepared to adapt to the sudden dangers of a tornado, an attack of wild squirrels or an unexpectedly rude comment made by a friend, then we ought to be prepared to adapt to the volatile momentum of present economic systems. So relax; we’re actually designed to meet these challenges.
We have all been riding a roller coaster of shifting home values, job opportunities and mortgage and interest rates. For some, the ride is sort of Sunday-afternoonish; just a detour through an otherwise benign economic landscape. For others, the ride has been a harrowing adventure in which death is not always defied. When it stops in Foreclosureland, the death of homes, dreams, marriages, innocence can be the consequences of the cruel and capricious market.
Should we be reassured because foreclosure rates actually dipped significantly between September and January (the number of default notices filed in the Golden State dropping to its lowest level in more than five years)? It’s not necessarily a sign of renewed vigor and health in the housing market, some analysts say. Most likely, these numbers reflect the “temporary result of a procedural change,” according to DataQuick’s online service, DQNews.com. The government is trying to ease the pressures on homeowners and at the same time keep them in their homes.
DataQuick provides real estate news and custom data for the industry, homeowners, journalists and just about anybody who’s interested in real estate fluctuations. Their analysts say that last year lenders filed about 40,000 notices of default against homeowners every month. Since September, the number of notices has slipped to 15,000 monthly as new state requirements force lenders to take additional steps to assist borrowers in their time of distress.
“No one expected defaults to stay at the much lower levels than we saw immediately after the new law took effect last fall,” says John Walsh, DataQuick president. “The bigger question is whether or not the housing market has hit a low and is dragging along bottom, or if the markets that so far have remained unaffected by the foreclosure problem are due for a fall. With today’s atypical market trends, it’s impossible to predict.”
In other words, we’re still somewhere in that realm between chaos and order and no one knows what might happen next. The basic timeline of a foreclosure starts not with a bang, but rather with a whimper. A homeowner neglects to pay his or her mortgage. After an average of about five months of nonpayment, lenders report a notice of default.
Traditionally, a sale date can be set within three months of the default notice unless the borrower pays up on his loan. The homeowner has until five days before an auction or sale date to reassume ownership of the property. Some owners walk away long before then, while some struggle to hold on until the bitter end. Some actually manage to salvage their property. Usually, the buyer at auction has to walk in with cash or a cashier’s check in the amount of the lowest-level bid on the home. That means that investors — not necessarily first-time homebuyers — are snatching up foreclosures.
While the chance to keep an upside-down home has improved with government intervention, the real ramifications of bureaucratic involvement, and the effects of the market’s wild ride, remain unclear. And that ride runs with highest velocity and risk through “affordable” and inland markets.
Sales of homes more than $1 million have also dropped this year, but the number of homes sold at more than $5 million in California has actually risen. So someone somewhere still has money, and faith in California property values.
They, however, represent a small minority. So, if these numbers and observations don’t yet make the path ahead any clearer for you, regardless of your income and residential status, then you’re traveling in good company.
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