Are Foreclosures Indicative of a Bottoming Real Estate Market?

Are Foreclosures Indicative of a Bottoming Real Estate Market?

by Raynor James

The real estate market is bouncing back from a legendary hot period by going ice cold. Money has dried up, home values are bombing out and foreclosures are at unheard of levels.

Is there any silver lining to the current real estate market? Is there any light at the end of the tunnel? Ironically, the foreclosure market might be providing it. Admittedly, you have to stare at it like one of those pictures of dots that reveals an image just before you pass out, but it is there. So, what is it?

The foreclosure market may be beginning to evidence the bottom of the real estate market. For those of you who are long suffering homeowners who have watched your equity shrink and shrink, I'll repeat that. We might be seeing the beginning of the turn around.

At its core, the real estate market is like any other market. It is all about supply and demand. As we know, the supply is huge and demand is minimal in the traditional real estate market at the moment. The foreclosure market, however, has begun to show a different profile.

Banks are stuck with foreclosures. They want them off their books. To get rid of them, they cut the prices pretty dramatically. For the last year or two, this hasn't really seemed to matter. Buyers were still sitting on the sidelines. Well, now their getting into the game. Reports are coming in hot and heavy that there is fierce competition for foreclosures. Banks are getting as many as 20 or more offers on their individual foreclosures.

Okay, so what's the big deal if there is competition for foreclosure purchases? Well, it represents the first signs of demand we've seen in the market. Foreclosures represent the best possible deal in most markets. If foreclosures start moving quickly, the next level of homes should heat up soon thereafter. Those homes aren't foreclosures! There regular old homes in the traditional market. As they are moved, the sellers will be looking to move up to new homes and so on.

Is this the sign we've been waiting for regarding the real estate market turning around? It could be. Does it mean the market will turn around tomorrow? Probably not, but we have to start somewhere.