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Todd: Hello. Welcome to Todd Miller TV. Joined here today with Oana and some very interesting
news was just reported and it is that for the first time in about seven years, in Las
Vegas, less than half of the houses are underwater. At the peak it was about 75 percent of all
houses were underwater which is pretty much every house of the loan because typically
in any market, about a quarter of all houses are owned free and clear.
But we just broke the 50 percent. Itís actually 48 percent at the end of the second quarter.
Itís what they reported. Now hereís the interesting thing that I want to talk about
with you specifically and educate everybody on.
The reason is itís not because all these people with mortgages got them resolved. Itís
because prices have been climbing and every time that price goes up, more people become
not underwater because now their house appreciated. Itís not because they paid down the debt
or they got a loan mod. Itís just because prices went up.
OK. What do you see the trend being given the amount of inventory we have, the amount
of inventory we may or may not have in the ongoing like ñ like how do you see this playing
out over the next six months, year, five years?
Oana: For the most part, I see a return to a reasonably healthy market. Hereís whatís
going on in the market. Weíre looking at six percent of the market now or something
in that order. Itís now REO, which is nothing. Thatís what a healthy market is. You always
have some bank-owned property but not very much.
Youíre looking at about maybe a third of the market now is short sales, which considering
what weíve been through, thatís pretty reasonable and the rest of the market is basically traditional
sellers, people who either owe nothing or owe less on the house than what itís worth.
So theyíre going to walk away with some money. So weíre looking at a return to some sort
of normal market.
Todd: OK.
Oana: I know a lot of people think, well, but thereís that shadow inventory and thereís
this tsunami of properties coming. Iíve heard the word ìtsunami of propertiesî for so
long. Sorry, I donít believe that. Itís not in anyoneís interest for that to happen.
OK?
Todd: 2010 was the first time I heard that word used.
Oana: Yes.
Todd: That was three years ago and it was sort of ñ we were already at a ton of properties.
Thereís already a ton of them and it was like they felt that was going to be the next
big wave and it never happened.
Oana: No, and itís not going to happen. Itís not in anyoneís interest.
Todd: OK.
Oana: So my point is that weíre returning to some sort of a normal market. Even though
I think a lot of people feel itís a manipulated market because of the shadow inventory out
there, whether you believe itís manipulated or not, itís not the issue. Whatís at stake
is that weíre going to be in this market where you have about half the market or better
than half the market having equity in their homes.
Youíre looking at very small bank-owned inventory and the rest being on the border or maybe
short sale and youíre looking at this continued appreciation. So as long as inventory level
stays low which makes sense for everybody for that to happen because that continues
the appreciation, that continues people not just walking away from the homes, because
theyíre upside down and theyíre thinking itís no longer worth it to me.
So long as prices keep trending up, even if theyíre trending up very slowly, it makes
sense for people to stay in their homes and get to a point where theyíre at breakeven
and not be upside down their homes.
Todd: OK.
Oana: So I see the market recovering. I see the market appreciating, maybe slowly, but
appreciating nevertheless. I see a lot of equity sellers coming to market more and more
going forward. I donít see a tsunami of bank-owned properties. I donít see numbers increasing
for short sales. I see the numbers of people with equity rising; everybody else, all those
numbers dropping.
Todd: What about the people who have said weíre in a bubble because prices went up
24 percent?
Oana: Prices were artificially low. So when prices drop artificially low, then youíre
going to have a big bounce back and thatís what my point was that weíre not going to
have a sustainable 24 percent year over year.
Todd: OK.
Oana: But we are going to have slow and steady appreciation, some great, some not so great;
but weíre going to have the slow and steady appreciation. Weíre not going to see a bubble
thatís going to burst.
Todd: Do you think in five years if we look back over the last five or ten years, that
the last year was the big appreciation? Do you just foresee us planning out into some
whatever equilibrium and being able to say that that was the five years or that was the
one year or the 24-month or 12-month period where prices appreciated the most?
Oana: I think thatís very likely unless some traumatic or dramatic thing happens nationwide
that somehow forces prices up. All of a sudden, we have inflation rising or something crazy
like that happening. [0:05:11] [Indiscernible] something happening on the national scene,
locally weíre just going to have slow and steady appreciation.
Todd: OK. I agree with that. So I just want to share that information with you. I get
this question all the time. I figured it would be easier to answer it in a video. Thatís
sort of historically how things have gone and when you look forward, you kind of see
thatís where theyíre going. I agree, no tsunami and the shadow inventory for the most
part, itís not in anybodyís interest to foreclose like crazy and trash all the markets
again. Banks have incentives now, a lot of incentives to make reasonable decisions and
only foreclosing on people that they know theyíre never going to resolve and everybody
else working out a deal.
Oana: Right.
Todd: A really smoking deal, like two percent interest rate, 40-year loans to make them
stay in and make those loans current again or make them performing, so they can sell
them or do whatever because thatís how they make their money.
Oana: Absolutely.
Todd: They donít make money foreclosing. They make money by selling performing notes
to investors.
Oana: Right.
Todd: OK. Sweet. So that is my update for today. Thank you very much Oana.
Oana: Youíre welcome.
Todd: And hope to see you on another video Thanks.