REO (Real Estate Owned) Inventory Continues to Rise to Record Levels Through Q4 2010 Opening Up More Opportunities for Investors

It seems like nearly every month and every quarter of a calendar year that goes by these days, the amount of REO (Real Estate Owned) inventory continues to grow to new record levels. It has become clearly evident that the U.S. Government and its Government Sponsored Entities (GSEs) will have a large role in dictating the pace and the efficiency of our housing market recovery. Even at current REO inventory levels, it will literally take years to unravel this unprecedented level of foreclosed housing inventory backlogged in the system. The combined REO (Real Estate Owned) inventory for the GSEs (Fannie Mae, Freddie Mac and the Federal Housing Authority) increased to a record 295,307 units at the end Q4 2010.
The REO inventory of the GSEs increased 71% compared to Q4 2009 (year-over-year) and these numbers are only expected to continue to rise.

According to a recently released report by Capital Economics, the Federal Housing Authority(FHA) has nearly 600,000 mortgages in serious delinquency which represent 8.78% of the FHA insurance in force. When you couple this information with the fact that through Q4 2011 nearly 13% of all mortgages were at risk of foreclosure, the trend of growing REO inventory will surely continue.

Reselling these properties is key to driving the housing market into recovery. With such high levels of delinquent mortgage loans and the continuing price depressing effect the increased Foreclosure and REO inventory has on non-distressed inventory, you can expect that values for non-distressed inventory will continue to fall through 2011. Real Estate Investors are key to helping stabilize the market. While investing in non-distressed inventory bears great short-term risk for your capital invested, particularly if the purpose of the property is not for your primary residence or family legacy purposes such as a 2nd home, investing in distressed real estate assets such as REOs represent a tremendous risk-reward ratio for the real estate investor. The RealtyTrac US Foreclosure Sales Report for 2010 indicated that the average discount for REO properties to non-distressed properties on closed transactions was 40.53%. REOs represent not only an opportunity to invest in deeply discounted real estate but will provide adequate inventory and opportunity to profit for the next few years as REO inventories continue to rise and must be resold.
The local opportunity to invest in REOs is even more astounding. According to data provided by RealtyTrac, there were 9,366 new foreclosure filings through February 2011 and 710 foreclosure sales through Auction in all Washington counties. The statistics show that roughly 92% of all foreclosed properties are not being sold at Auction, but going back to the Bank and becoming part of the large REO inventory. The statistics in Washington reflect the same trend in the national data with roughly only 7.5% of properties being completed through the Foreclosure Auction process. With Washington cities, Tacoma and Seattle, representing 2 of the top 10 best real estate investment bets in the country, #1 and #5 respectively, investing your capital in deeply discounted distressed REO assets represents a very good investment option.
At the James Real Estate Group, we focus on helping investors acquire distressed REO properties in key areas and communities well positioned for a turn around and provide an excellent profit potential. Please feel free to contact me at any time via our website at to learn how you can get started investing in REOs, via phone at 206-300-2693 or contact me via email at to learn how to get access to our exclusive REO inventory. All information is private and confidential.

1 Response

  1. Reading your article helped me a lot and I agree with you. But I still have some doubts, can you clarify for me? I'll keep an eye out for your answers.

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