A quicker way to step out of real estate 'shadow'

Re: ' "Shadow" real estate inventory may take 4 years to clear' (Feb. 2)

Dear Editor:

The shadow inventory will be absorbed much quicker once prices stabilize and the financial markets believe prices have bottomed. This will allow mortgage underwriting and products that were A-paper from 1980-2001 to return to the market. And this will, in turn, unleash the millions of "shadow buyers" waiting to take advantage of the low prices and low rates who are prime borrowers and who have been shut out of the market with the overreaction and temporary emergency underwriting rules we have now.

One example: Once Fannie Mae and the Federal Housing Administration no longer fear that the 5 percent of move-up buyers who want to keep their old home as a rental will buy and bail, they will remove the 30 percent equity requirement that has kept millions of honest people from moving up, thereby unleashing millions of buyers who have been dreaming of moving up and keeping their old home as a rental.

Every other real estate recovery was led by this group of common-sense consumers, who in down markets want to buy low and keep their old home as a rental and sell it high after the market rebounds. So once Fannie and the FHA no longer are in panic/overreaction mode, this will be one of the first group of "shadow buyers" unleashed, quickly absorbing much of the feared shadow inventory, and this will lead to even more confidence in prices, allowing other temporary-overreaction underwriting nonsense to go back to 1980-2001 rules.

And eventually, we will get back to normal ... much quicker than four years.

Joe Bingham
Bingham & Co. Inc
Denver, Colo.

                                         

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