Are we witnessing the greatest example of collusion in US, if not world history right before our very eyes?
col-lu-sion [kuh-loo-zhuhn] – noun …a secret agreement, esp. for fraudulent or treacherous purposes; conspiracy: Some of his employees were acting in collusion to rob him.
Currently, the number of bank-owned/REO properties on the market is estimated to comprise only 30 percent if not only 5 percent of the total foreclosed property (REO) inventory on banks’/financial institutions’ books. The remainder of the REO inventory is being held back from being sold by the banks/investors who own them.
But why?
An immediate sale of all properties on the open market would crush the housing market. An increase in inventory of that amount and at that rate would create a Buyer’s Market like we’ve never seen before. Market values would plummet. This would cause even more home owners to say, “Screw it!” and let their homes go into foreclosure. That would cause market values to plummet even further and the US economy could potentially collapse.
Even if the US economy could take it overall, this scenario would, at the very least, crush banks and lenders. Every property that is on their books would be worth less and less as market values plummet. This would decrease the value of those institutions even further. Without much, if any TARP money to bail them out, some banks would be faced with Chapter 13 bankruptcy. To add salt to the wound, banks/lenders could be staring at yet another wave of foreclosures from home owners that bought in the last few years, many of whom only put down 3.5% percent using FHA financing.
The way for banks/lenders to avoid this scenario is to slowly leak properties on to the market adjusting the valve as they deem fit, which is what is happening as you’re reading this. By releasing only a few at a time and causing a decrease in overall inventory, they are causing the market to start stabilizing. This is happening right now – most likely in your town right before your own eyes.
For example…in the Washington, DC area, inventory is down over 50 percent from last year and almost 70 percent from 2007. Why? Partially because there are more people that can’t afford to sell. But it’s mainly because the number of REO properties on the market has decreased dramatically. There is very little inventory and buyer demand has doubled which has caused prices to stabilize. In some pockets of Northern Virginia, market values have increased by 2, 5 even 10 percent since January 1, 2009 (yes, you read that correctly – I can send you comps/examples if you don’t believe me).
In essence, banks are artifically controlling the housing market and values.
But this can’t be a “one bank” scenario. No one bank has control over the majority of the REO’s in the country. Nor does any one bank have the gift of telepathy or mind control to persuade other banks to not flood the market with their REO’s without their knowledge or consent. Several if not many US (and international) banks/lenders must be on the same page as one another for this to work.
col-lu-sion [kuh-loo-zhuhn] – noun …a secret agreement, esp. for fraudulent or treacherous purposes; conspiracy: Some of his employees were acting in collusion to rob him.
It’s very hard for me to believe that banks are not colluding with each other to save their a$$es by stalling the sale of REOs sitting on their books at this very moment.
But wait, there’s more…
Those within the US government “strongly suggested” a foreclosure moratorium back in October of 2008 and again in the beginning of 2009. This was intended to “help save those who were about to be foreclosed on” by giving them a few months to save up money and get back on their feet with their payments or getting loan modifications. We all know how that turned out…
So what was the real reason they pushed for those foreclosure moratoriums? And why haven’t the foreclosure floodgates opened now that the foreclosure moratoriums have been lifted?
Those foreclosure moratoriums had the exact same affect on the housing market as holding back REOs from being sold – it artificially decreased housing inventory helping cause prices to start stabilizing and get buyers off the fence and into the market (aka artifically controlling the housing market and values).
Here’s another question for you…which came first, the banks holding back REOs from the market or the government’s request for foreclosure moratoriums? Not quite sure because they both started happening at about the same time (must be coincidence).
NAR and many others have fought vehemently to keep banks out of real estate for this and other reasons. Yet, here we are witnessing banks in cahoots with each other with their hands deep inside the real estate cookie jar doing the very thing we were afraid of them doing in the first place. Is it that no one cares or that everyone is turning a blind eye?
