The ever-increasing number of short sales on Long Island doesn’t really surprise me anymore. In fact, nothing really does. With major banks like Citi trading at under $5.00 (as of this day) and as low as .97 in the last 3 months, what’s there to be surprised about?
Well, in order to achieve some shock value (because that’s what good writing is all about), I’m going to focus on what we know about the local Long Island real estate market and how short sales are shaping up to be a great challenge. Below is a chart of short sales on Long Island. The chart is split into each respective zone, showing how many short sales there are as of April, 2009 (note: this is all from the Multiple Listing Service of Long Island - if a short sale is marked, as it should be with a Y for Yes in the listing, that’s what these numbers represent. What these numbers may not represent is real estate agents who don’t know their listing is a short sale or they don’t correctly upload the listing and check of Y for short sale). Another words, figure these numbers are larger.
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If you do not know which zone your town is located, feel free to call me at 631.587.1700, ext. 51.
What we see in this chart is clear, with over 3700 short sales on Long Island and only 262 sales in the previous 90 days (that’s only 87 short sales sold per month), sales are lagging. So I’ll use the stats from this chart and divide the short sales available with the short sales sold over a time period of 90 days, and the scary thing is, there is over a 43 month supply of short sales on Long Island.
That means, at the current rate of sales, it would take 43 months (3 and half years) to sell off all the short sale inventory currently on Long Island. Now of course, the economy will change by then and things will get better….ENTER DOOM SLIDE:
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Option ARM (Adjustable Rate Mortgage) loans are the riskiest loans that banks wrote during the “anyone can buy a home” period of 2002 through 2006.
These loans are notoriously called, “NINJA” loans or No Income, No Asset loans. Nothing checked on the buyer at all. It’s like passing high school in many public schools throughout the country, if you’ve got a pulse, you pass. Well in the case of Option ARM loans, sometimes the person getting the loan, dididn’t even need to have one!
That orange mountain in that slide shows the reset schedule of these aweful loans, many of which have borrowers on the other side of them, that are behind on the mortgage payments already. The key issue here is, the government cannot help millions of people just simply keep their homes (homes they shouldn’t have owned in the first place).
Of course I always have to provide the entire picture:
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This slide shows us that as that throughout 2008, prime borrowers are defaulting at higher rates than all other category loans, including sub-prime, options and other type of mortgage borrowers.
A prime borrower is considered to be one of the best for lenders to invest their money with. Prime borrowers have loans that are fully documented. These are buyers who had good jobs, assets, credit scores, etc. Hence the term “prime”.
So where am I going with this?
If prime borrowers, the best borrowers, are defaulting at high rates, then what is the logical assumption for the “NINJA” borrowers?
If the dots are not connecting, please call me at 631.587.1700, ext. 51.