Let’s explore foreclosures for a bit. There are many in the MSM (Mainstream Media) and the NAR (National Association of Realtors), touting the supposed decline in foreclosures during 2011 as indication of market stabilization and therefore strengthening. Let’s keep in mind however that these same people were also telling us the following:

- Home values would always rise (it’s Real Estate and therefore land and God isn’t making any more).

- Loans such as Interest Only, ARMs (Adjustable Rate Mortgages) and Pay Option ARMs (which most often left the home  owner owing MORE on their home than they originally borrowed) made perfect sense for the savvy buyer because the homeowner could count on two things, 1. their income going up (meaning they could likely afford the higher payment) and 2. the value of their home going up (so that they would later have a lower LTV, meaning Loan to Value ratio) and could then easily refinance into a more vanilla 15yr or 30yr fixed loan.

- The products such as HELOCs (Home Equity Lines Of Credit), some going as high as 125% LTV (meaning you could owe $125k on a $100k home) also made sense for the same reasons listed above.

- That there was no bubble.

- That securitization of these loans was a safe place for investors to put their money.

Well, as most of are aware, those five axioms, repeated often and loudly by the MSM and the NAR, above proved to be the furthest from the truth.

Now, please note I’m not what most would call an “educated man”. I have very little in the way of formal education past a couple of semesters of community college. But with that said I do posses the ability to exercise critical thought. I saw the collapse coming in 2005, although even I was a but naive in terms of it’s severity. I saw the S.I.S.A. (Stated Income, Stated Asset) and N.I.N.A. (No Income, No Asset) loans that we’re being made, where if you had a high enough credit score, you could either just tell the banks how much money you made and even that it was none of their business.

I saw loans where one could get up a loan equal up to 100% of the homes value with a 580 FICO score. I saw appraisers being pressured into inflating values on cash out refinances so the homeowner could effectively raise the amount of money they had in the residence that they were told to treat like an ATM. Basically the cheerleaders (the Federal Reserve, Realtors, Mortgage Lenders and the Media who depend on their advertising dollars) kept telling the less than savvy populace to run towards the finish line as fast as they could without anybody ever pointing out that immediately after the finish line was a cliff.

So when we hear these same cheerleaders talk about how the market is stabilizing let’s take it with more than a few grains of salt. The fact of the matter is that there is still a few years worth of “shadow inventory”, people are still losing their jobs and finding new ones is getting harder and harder and the ONLY reason foreclosures have “slowed down” is because we, the American people, have gotten hip to the Robo-Signing fiasco and other shady methods of foreclosure. It’s just like how our Government is presenting a supposed dip in unemployment as a positive sign when really it only means that people’s benefits have run out and they’re now chronically unemployed.

So with that said, beware of the cheerleaders and be patient with the situation. The upside is genuinely that interest rates are at unheard of record lows and that there are a ton of opportunities out there both or home-buyers and investors. Just keep in mind to utilize your own judgement and to take what anybody tells you (including me) with more than a few grains of salt. Be judicious and wary of any Kool Aide put in front of you.

With that said, stay positive, set goals, do your research and keep you aim set high. Fortunes are often made by the few while being lost by the many. Just don’t be “fooled again” and you might just fine.

Cheers,

J.L. Scott Properties Team