Apr212012

Where are the high-end foreclosures?

Lenders have been slowing their acquisition of new REO since February. In fact, the decline in REO going back to the bank has been rather dramatic.

Banks are also dramatically slowing the rate at which they put REO on the MLS. As a result inventories all over California have been declining. Banks are obviously planning to withhold inventory until the market bottoms. Expect to see a low-volume rally as the few qualified buyers are forced to pay higher prices.

As a result, the kool aid is flowing again….

One thing notably absent from the few foreclosures that are occurring is anything over the conforming limit. Of the 196 REOs listed on the Orange County MLS over the last 30 days that are still active, only 12 of them are priced over $750,000 (a $729,750 loan plus a minimum down payment). That’s only 6.1% of the REO inventory. Nearly a third of Orange County properties are currently valued over $750,000.

Lenders know there is no move up market and few borrowers with 20% down and the credit to get a jumbo loan. So what are lenders doing? They are letting all these people squat. It’s a great time to be part of the 1% — or in this case the 30%.