2017 Market Predictions as it relates to REO

By Tamika Marks

Using the market predictions set forth by Forbes, I’ve created a similar list based on the REO market.

While it may seem as though REOs have a greater impact on homeowners, the investor may face an equal share of concern.

1) Increased Pricing — The days of discounted pricing has changed. At it’s worst, the market bubble REO values were at an all time record low. Properties were deeply discounted as lenders scrambled to move the inventory. Today we see values increasing at a steady pace and the lenders are no longer leaving a large spread on the table.

2) Affordability may worsen — Lending guidelines are ever changing. Jobs are ever changing. We see the salaries remaining stable while the cost of living and job outsourcing are increasing. Consumers are less likely to qualify as easily as they did in previous years.

3) Shorter Supply — While our values are increasing slightly, we still have the benefit of some of the best cap rates in the country. More buyers are re-investing in real estate creating a larger demand and a smaller supply.

4) Increased Competition — We are seeing buyers from all over the country. International buyers are now getting in on the investment opportunities that the Chicago Market has to offer.

5) Political Uncertainty — We face some political uncertainty as it relates to housing policy going into a new presidential term.

6) Sale of REO properties — Traditionally REOs were advertised for sale and marketed via the MLS. Lenders are moving towards a nontraditional stance by selling a larger portion of the assets via online marketing. These assets can be both vacant and/or occupied. Costs are being passed on to the buyers.

In closing I would like to say REO sales are on a constant decline. In 2009, REOs represented just about 27% of closed sales. As of 2016, this amount has decreased another 25% falling to about 19 % of total closed sales being REOs. Owners and Investors are all affected by REOs. A foreclosed home in the neighborhood can not only affect the values but the ability to rent neighboring units. Investors/Landlords who are in the know about ever changing market trends are less likely to get a visit from an REO agent like me!

Tamika Marks, Managing Broker
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