Now is the Time to List and Push Privately Held Shadow Inventory Out into the Open

If you are a homeowner that has had the luxury of avoiding foreclosure while holding onto a property that makes very little sense to hold onto, now may be the time to List your property for sale.   The factors that affect this timing are:

1.  Increases in housing prices are predicted to plateau for the immediate future.    The current nearly 2 year uptick since values began to fall in 2007 is slowing.    Part of the appreciation in real estate was not truly “price appreciation” but was an artificially depressed inventory.  Lenders shrewdly avoiding creating a glut of available housing and driving down prices with too much inventory.   Foreclosures are predicted to resume and could hit the market  afresh in 3 to 6 months reversing some of  the price gains.

“CoreLogic, Zillow, and other industry observers concur prices appreciation is set to slow, and Monday’s US Housing Market Update from Capital Economics reinforces this prediction.”

A common sense factor in the likely leveling of home values for the short term is the balancing of investor zeal – former lower prices brought investors off the sidelines and now their competitive bidding has driven up prices in late 2012 and early 2013 to the point where in many areas, investors are frustrated and returning to a ‘wait and see’ posture.

The impact of investors is greatest on starter homes in most markets so the price depression caused by investors dropping out of the market may not set in right away for moderately priced homes or upper end homes.

2.  New deadlines for implementation of Dodd-Frank regulations and other lending restrictions are likely to cause additional shrinkage in the pool of qualified buyers by the end of the year.

“As part of the 2010 Dodd-Frank Act, several major changes to the mortgage industry will take effect on Jan. 1, 2014. Efforts by the Consumer Financial Protection Bureau, the federal agency with rule-making authority under Dodd-Frank, to reform the mortgage lending industry from the ground up has resulted in an avalanche of new regulations, totaling nearly 4,000 pages, which were published in January.”

3.  Rates have been rising and as a result, the average home buyer is finding more and more of existing inventory ‘out of reach’.

“The days of record low mortgage rates have come to an end, as fixed-mortgage rates hover around 4%. And while there are many saying that rising rates won’t hurt the housing market, others are more concerned.”

These three factors lead to the conclusion that if the train has not already left the station, now may be the time to bite the bullet for underwater homeowners and to put their homes on the market for the least damage to their credit and smallest tax exposure or potential deficiency exposure that they will likely experience for the next few years or longer.