Posted on 08/24/2014 2:36:41 PM PDT by expat_panama
Focusing on REO levels as a single data point is an error. REOs are the last, worst thing a bank wants. Worse, there are many ways a bank can lower its REO holdings:
-sell them at a massive loss - this further constricts credit.
- slow down and/or drag out foreclosures - falsifying the real picture.
- don’t start foreclosures - leave 120 days alone
- depend on government work outs - which worsens the problem as no debt gets cleared e.g. What difference does it make that you’re paying 3% on a $400K mortgage when you cannot sell for more than $400K. You’ve lost your mobility and are stuck for the same debt.
Better let the market clear and withdraw all this government intervention. Forget the FHA loans, etc. The whole RE house of cards exists to support local government which is on the verge of bankruptcy without artificially high RE valuations on which to spread/assess the taxes demanded by the local/state governmental bodies.
All this is dragging out the RE recovery and creating new bubbles.
I most certainly do not look at housing solely through the lens of REO... My business is highly sensitive to resi construction so it’s one of dozens I look at. I posted it because it was a new data point.
I know you do and didn’t mean to insult you. I posted mainly for lurkers. We need FReepers to be as economically educated as possible.
Gotcha. Sorry I just got back from a very long weekend and no caffeine on board yet this morning :-)
Oh wow! I didn’t realize I was dealing with a caffeine addict. I’ll just back out of this post now. Stay calm. ;-]
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