Ward takes the stairs.

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Article of the Month for April 2008 Printer friendly version

Have They Cancelled Death, Divorce, DiseaseÖ??

by Ward Hanigan

Itís funny, but many people think there arenít any foreclosure bargains around nowadays, due to the untold thousands of over-liened properties currently going to auction. Itís as if they think thatís the primary event that fuels foreclosures.

Hey, maybe it is the giant kahuna in the foreclosure universe currently, but until you can tell me that constant disrupters like death, divorce, disease, etc. have been cancelled, then nothing has really changed.

And what the uninitiated donít seem to realize either is that foreclosure deals are rarely ever found where the loan in default is less than 5 years old. And right about now, that time frame neatly skips over this sub-prime loan mess that everyone is focused on.

So when I hear these pained laments about the lack of ďgood dealsĒ at the auctions, I almost have to pinch myself to keep from outright laughter.

I know I must be somewhat perverse, but I think itís really comical to observe the useless hand wringing and wailing going on in this market while a few pros are quietly scooping up the same good deals that constantly re-occur, due to the dance of chance called life.

From what I can see, this mortgage miasma will persist for several more years at least. Why? Because the lenders who survive their upcoming, gut-wrenching gauntlet to solvency, wonít thereafter make a home loan to anyone who canít convincingly document that they have the verifiable capacity to repay it. The days of no-doc loans are gone for good.

Wow, what a novel conceptóback to the tried and true requirement of affordability.

That construct will dictate this marketís eventual recovery to normalcyÖhowever long it takes for home prices to deflate to that time-tested level of living within your means.

Historically such downward price spirals are slow to start. Thatís because most homeowners are loathe to drop their prices quickly. If they can afford to hold on and wait they will, hoping for the return of better days.

Thus the sellers who will lead our inevitable price decline will be unemotional, unattached lenders bowing to governmental pressure to slash their bloated inventories of REOs or go under. That hasnít happened yet, but it will occur just as surely as night follows day. And when it does it will spook many skittish, fence-sitting sellers to follow suit, taking the market down in the midst of their panic.

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