Harold Bubil is taking the week off. This column originally appeared on Feb. 26, 2012.
If you think economists are obsessed with numbers and not their social consequences, you haven’t met Jack McCabe.
Speaking at a Herald-Tribune “Hot Topics” forum on real estate subtitled “The Year of the Short Sale,” McCabe delivered a list of dire statistics related to the glut of distressed homes in Florida.
More than 1 million residences in Florida are in foreclosure, owned by banks or in default on mortgage payments out of 11 million, he noted.
But then he got personal.
“I get calls, emails and letters each week from people asking me to help them save their homes,” said McCabe. “It is heartbreaking at times . . . ”
McCabe paused for almost 10 seconds to regain his composure.
“ . . . because I feel for these people,” he continued, his voice choked with emotion.
Sometimes, though, he sees endings that while not happy aren’t tragic.
“I had a lady call me who said, ‘Jack, I got a letter from Chase the other day. I owe $215,000 on my mortgage and haven’t made a payment in two months. I would like to get your advice. They are saying that if I put my home up for sale, they are willing to accept $115,000, they won’t file a deficiency judgment, and they will give me $35,000 to move out.”
“ ‘Take it!’ ” McCabe told her. “ ‘Say, “Thank you.” Take it.’ And that is what she is doing.”
McCabe noted more banks are starting to accept short sales as a way to avoid the even larger loss they would likely suffer by filing foreclosures.
“Banks are starting to write down principal balances,” he added. “To bring stability to the housing market, we have to stop this flow of foreclosures and we have to do something to keep people in their homes and continue to participate in our economy as consumers.”
Other “green shoots,” as McCabe called them, are an increase in sales and a decrease in listings as reported by real estate agents. But, he warned, the inventory of distressed properties, including “real estate-owned” (REO) properties taken back by banks, dwarfs the MLS inventory.
And banks are starting to release foreclosures back onto the market after a lull brought upon by the “robo-signing” scandal.
“Those are going to be the price drivers, these distressed sales,” he said. “It is going to be hard to get a retail price when there are so many distressed properties selling for 50 percent below what is listed on the MLS.”
But for all-cash investors and families who can qualify for mortgages, this is a spectacular time to buy, said the economist, who has been criticized by Realtors for being overly pessimistic. But at the H-T forum, even broker Michael Saunders found herself agreeing with him. Twice.
“In seven to 10 years, the properties that we can buy for pennies on the dollar now are going to be worth an incredible amount of money,” McCabe predicted. “But for the next two years it will be a rocky road.”
