The US property market is facing a 'monster mash', which could put its ongoing recovery under threat and deter real estate investment. RealtyTrac, the housing data provider, claims there are two beasts looming over the sector and until they're thwarted, recovery will run the risk of collapse. It maintains vampire REOs (real estate owned properties) and zombie foreclosures are causing problems by dragging down local markets and causing lenders to accrue losses.
But what are these supernatural threats? According to RealtyTrac, vampire REOs are bank-owned homes that are still occupied by the previous homeowner who was foreclosed on. Conversely, zombie foreclosures are still in the process but have been vacated by the homeowner. Why the names? Well, one appears alive for all intents and purposes but is actually deceased - aka, it doesn't look like a depressed property but actually is - while the other both looks and is dead but can still inflict some damage.
Explaining Vampire REOs, RealtyTrac wrote: "On the surface these properties often will look like normal, non-distressed homes, but beneath the surface they represent a shadow inventory that is becoming more imminent as rising home prices motivate banks to sell off these homes to try to recoup their losses on soured loans." This undoubtedly has an effect on the market and can also cause lenders to haemorrhage cash if the properties prove unable to sell.
On the other hand, zombie foreclosures appear visibly distressed, often falling into disrepair. While this causes problems for lenders, it also drags down home values in the surrounding neighbourhood. Meanwhile, homeowners that have left the property may be unaware that they are still responsible for property taxes and other expenses, causing them to shore up yet more debt.
So how can we slay these demons of the US real estate market? RealtyTrac claims that it ultimately boils down to investors taking advantage of the opportunities that are there. Vampire REOs are imminent inventory and can be acted upon before other buyers and investors are aware of it, enabling people to get the best deals. Meanwhile, zombie foreclosures offer the possibility of a short sale that helps homeowners, local markets and banks that are often hesitant to foreclose.
- Tuesday 15 October 2013