Is This Home Buying Spree Just Another Bubble?

[Charles Heyward]

You must be tired of hearing the ‘experts’ saying that NOW is the best time ever to get into the buying spree. And I must tell you that the statistics generally tend to support this statement. Just by looking at the rise in short sales and foreclosures it’s obvious that investors have more opportunities flowing in as loan delinquencies increase.

Let’s check the stats for the first two quarters of this year. A Federal Housing Finance Agency report suggests that short sales rose by 45 percent between April and June 2009. In 2008, the total number of short sales was reported at 15,704. In just the first two quarters of 2009 the number of short sales has reached to 19,759, an increase of about 25 percent. The causes are easy to identify. The rise in short sales is primarily because of the rise in unpaid mortgage loans. The one month delinquent loans increased by 11 percent while the over two month delinquent loans saw a rise of 21 percent in the second quarter of 2009. In addition, foreclosures increased by 23 percent in the second quarter of 2009 with a rise in over three month unpaid loans.

A logical conclusion would be that the numbers mentioned in the Federal Housing Finance Agency report clearly indicate that buyers will be flooded with opportunities from short sales and foreclosures. But there are many skeptical people that are describing these phenomena as ‘just another bubble’ and frankly speaking the previous period has taught us to be at least more cautious.

Why do I still think that indeed it is the best time to buy? The answer is simple: merely because the processes of short sales have been accelerated. And that is not shown only by their increased number but also by the average period that is nowadays required to close the process and also by the increased level of authority for servicers to participate in short sales. You see, homes on the verge of foreclosure seem to be everywhere and I agree that it looks like another bubble ready to burst if there’s not a strong base to facilitate and accelerate the process of moving these properties from the market to the buyer. And in my perspective it’s not the case as now it takes a shorter time to make it happen and there are more people who can do it.

That is why, besides the rising loan delinquencies, I have reasons to believe that NOW is the right time to buy a property.