In the year 2011, many property pundits had predicted an impending crisis in 2012. They talked of a large number of properties being foreclosed as a result of the downward swing of the American economy. This increased foreclosure was supposed to have driven property rates down south throughout the country. Those fears have not been realized yet.

Although home foreclosures have jumped when compared to figures five years ago, from an overall perspective they are not as alarming as originally thought. Reuters reports foreclosures in February jumped by 12% from January 2012, but down by 11% from January 2011.

RealtyTrac reports that there were a few more foreclosures in May than in April but the overall figures were still lower than in May, 2011. Based on year over year comparisons, RealtyTrac tells us that the foreclosure activity has actually been on a decreasing trend for over 20 months continuously. But this spike in May does tell us that it is not going to be a smooth ride towards the end of this supposed crisis.

Various reasons have been put forward for this drop in foreclosure of properties. One of them is the tilt of various banks towards short sales. Banks realize that more money is to be made via short sales rather than from repossession. Banks do not want to be drawn into odd jobs like maintenance, management and marketing of a property when improved pricing will itself help to draw in interested buyers.

Increased foreclosure rates should have played a role in decreasing property rates but a dearth of inventory is actually a major cause for the continuous rise of property rates. In 2010, some analysts had predicted in an article in Forbes that USA may have to confront a deficiency in housing properties in 2012. This had started from 2011 itself.

In an article published by Forbes analysts had claimed that taking all parameters into consideration, America requires an annual inventory of 1.6 million houses. In the beginning of 2011 what they had was enough only for seven months. reports that there has been a drop of 20% every year for several years in the national inventory of for sale properties – whether they are new or existing ones.

Recently, there has been spike in mortgage purchase applications, which points to the possibility of even more contraction and/or higher prices of the inventory in the coming months. Besides a recent spike of 13% in weekly mortgage applications indicate a busy summer ahead.

What is heartening to see is that many owner occupied buyers have also jumped into the fray which helps the industry which is already burdened with a reduced inventory. In addition, all buyers continue to benefit from an environment with a low lending rate as the opportunity costs of cash buying is pretty high.

And with major EU countries such as Greece, Spain and Greece still mired in an economical mess, investors have become even more risk averse. This means that more money now flows into haven securities which include the US Treasury note. All in all, it is for the buyer to understand that there is a supply-demand issue at work.

With the recent spike in demand for mortgage products, processing times could increase. The borrowers should not wait for a further lowering of lending rates as the cost benefit of that could very easily be offset by the price rise of a desired property. Personal interest should always dictate the investments that any investor should make. However real estate is turning out to be a pretty attractive sector in this regard, what with a reduced inventory, rising rental rates and reduced financial rates.

If you are searching for Aspen Real Estate contact Drew Kitchell with McKinley Sales Real Estate at 970.925.5900

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