Foreclosure Investing: Then and Now!

Foreclosure Investing: Then and Now

I was reading Dallas Morning News and came across an incredible journey to the not so past history of home foreclosures as observed by a foreclosure specialist.

It is definitely worth a read even if you don't live in the Dallas area.

In the article, the interviwee reveals real estate investing differences and how foreclosures are different now and back then. Read the whole article here.

"...Take us back in time. When did the last major foreclosure cycle get under way?

Back in the early 1980s, we were seeing double-digit interest rates that at one point hit 16 percent. Consequently, it was just too expensive to build for a period of time. This created pent-up demand for more development.

It soon became a matter of who could make the money available the quickest. So there ended up being many, many more deals done than there should have been. This led to the beginning of a real estate recession, close to depression, in the D-FW area.

A "recession" or "depression" presumably led to some properties going back to the lenders?

Yes, foreclosures really began to hit in 1985. But unlike today, the first impact was on the commercial side, which had been hurt by massive overbuilding. The same thing that happened in the early 1980s is happening today, but on the residential side. The common denominator is money, and lots of it...."

"... In 2005, we saw 934 home equity loans posted for foreclosure, and that number continues to rise. In the first five months of 2005, there were 356 home equity postings. Over the same period in 2006, there were 429; that's an increase of 20 percent.

So with overall foreclosures, we're only about 75 percent of the way to 1989 levels. Obviously something is better this time around?

Back then we saw meaningful degradations of value, in some cases 25 to 30 percent declines. But we haven't seen that today. If you look at months' supply figures from 1989, inventories were running at 13 months, while today we're just at about seven months, so we're not at that point yet...."

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