I just read an article on MSNBC the other day about the upcoming batch of foreclosures in the US housing market and it’s still rather scary south of the border. Some of the numbers that stand out are that there are another five to seven million properties potentially going into foreclosure right now, but it could take three more years to have them all processed and on the market.
This doesn’t even take into account the upcoming distressed borrowers who are running into problems due to the economy, layoffs and overwhelming debt. The US foreclosure process can take up to a year and sometimes longer, which can extend the problem even further.
Interestingly, the real story isn’t the statistics that are being released it’s the story behind it. One set of statistics shows that actual foreclosures are slowing down which normally would be a sign of optimism for the markets in the US. The article however, points out that there is a “shadow market” caused by the lag that is occurring from the actual initial default to foreclosure. Initially this was a fairly quick process, but as the numbers have become overwhelming, it is taking longer and longer to foreclose on properties.
Also, these new batches of defaulting borrowers are less likely to be part of the sub-prime mortgage borrowers. The new defaults are the economic victims I mentioned earlier.
The important realization you have to understand is the US market still has plenty of turmoil to go through. While the Canadian market is seeing an increase in values, a surge in buying and overall stability, the US could have years before it starts to become stable.
With millions of new foreclosures set to hit the books and needing to be sold to the public, what do you think the affect will be on current prices in those markets? If you are guessing there is potential for even further decreases, you won’t be far off. Unlike foreclosures in Alberta, these properties go on the auction block in the US and will sell for pennies on the dollar.
This could create both fabulous opportunities for those with big pockets and longer time frames or nightmares for those who purchase through traditional channels with visions of making big money in the near future. My advice for anyone considering “investing” in the US Real Estate market right now is to have a very long term vision and forget about trying to make money in the current market. If you are considering purchasing a vacation home because the prices are so great right now, give it another six more months and see how much you saved!
