I suppose if real estate was easy those two guys wouldn’t be in Ghana right now dodging bullets and digging in a swamp. Real estate, like math and diamonds and the cranial structure of a narrow majority of those in blue states, is hard. It wasn’t always this way. In the early 2000s, even the sort of guys that resort to buying sluice boxes in African flea markets found a way to make money by buying this and selling that and building this or that. Today, in 2012, real estate, it’s hard. But the fact that it’s hard makes it so much better for us. See, we’re smart. And if everyone in the world of real estate were smart then we wouldn’t have as many television shows about gold, so, in fact, it’s better that real estate is hard.
The foreclosure market is a study in real estate stupidity. There are hard luck examples of real estate gone wrong: Families who bought and then lost their jobs. Or people who bought and had other hardship- illness, death, etc. This is unfortunate, and I will forever feel sympathy towards those that through no mistake of their own lost a home to foreclosure. But this isn’t about them. It’s about the people who built three spec homes in 2007 because, well, because why not! Everyone’s doing it! Yay spec homes! Those guys, and gals, who engaged in that behavior deserve their economic fate, and hopefully our Dear Leader won’t extend any more failed bailout policies in their direction. It’s time they take some very bitter medicine.
The other group that I find somewhat comical is that group that had an asset that was wildly valuable in the mid 2000s. The group that was in over their head, but the asset kept appreciating, so they kept holding. The group that had offers in 2005,6,7 that would have made them legitimate fortunes. That group. The group that when they had those offers didn’t sell, because they always wanted $100k, or $1MM, more than the market would bear even then. That group that fell victim to their own greed. As I see members of that group lining up to face foreclosure I can’t feel sorry for their own real estate stupidity. Perhaps there’s room in Ghana for them too.
The Lake Geneva market has a few of these sorts involved in foreclosure right now. Out of respect, I’ll omit the associations where I see these homes, but it’s safe to say that there are a child sized handful of foreclosures in the lake access market that are going to be a direct result not of hardship, but of real estate greed. I see foreclosures in Geneva National, still, which is no surprise. I see foreclosures in Country Club Estates and in Geneva Oaks, I see a couple REO’s in the Abbey Villas, and I see at least one pending foreclosure in Abbey Springs. No worries, when Abbey Springs bleeds it bleeds diluted liquid gold.
There has been some foreclosure activity on the lake this year. There is a pending sale on Maple Lane of an REO, and there is a sheriff’s sale over on North Lakeshore of Fontana that is waiting to be approved so that it can sell to a buyer who will in turn sell it to someone else. There is another possible foreclosure on the south shore of Fontana, but the hard thing about forecasting foreclosures based on lis pendens notices is that many who are seeking a loan modification are forced to fall into delinquency before the banks will consider a change to the terms of their loan. Yes, that’s a self defeating process. But we think that because we’re smart, and we’re smart because we’re not in Ghana.
For now, expect foreclosures to continue. FHA is in trouble, and will likely need a taxpayer bailout. FHA is the mortgage backer that propped up the housing market over the last four years, and now they’re paying the price. And by they I mean we, because we get to pay individually for their collective housing sins. I see no let up in defaults, so while writers like Nick Timiraos see some housing rebound and see pricing appreciation, I see no such thing. This is why we must hunt solely for value, and we must secure it with intelligence and not be swept up in some rushed buying decision just because it can feel good to be pushed along by a crowd. Individual markets will succeed and individual markets will fail, but as long as defaults are steady who could any massive housing recovery? Not me. But that’s because I’m not in the market for a used trommel. Not yet, anyway.
Fontana photo by Matt Mason Photography.