Are the Foreclosure Floodgates About to Open?
April 28, 2009 by Danilo Bogdanovic
Filed under News
At the end of last year, many banks and financial institutions including Fannie Mae adopted some sort of “foreclosure moratorium” and they did the same thing again this year at the request of the Obama administration. The moratorium halted foreclosure proceedings on many who were facing foreclosure or in the process of getting foreclosed on.
Fast forward to April 1, 2009…
The moratoriums have pretty much all been lifted and the banks are back at it - foreclosing and eventually putting those properties on the market. Based on how long foreclosure proceedings take in Virginia and how long banks take to process everything before listing the property, we should start seeing many of these recently foreclosed properties hitting the market sometime this summer to the end of the year.
I’ve also heard rumors and talk about Fannie Mae and other banks thinking about taking an “let’s get rid of it all as fast as we can” approach to their foreclosure inventory (anyone else hear/know anything about this?). If Fannie and other banks release their inventory onto the market all at once, I think we’ll be in trouble. Yes, they’re only rumors and I hope that they stay stay only rumors. But what if there is a flood of foreclosures hitting the market?
These moratoriums have artificially deflated real estate inventory across America. In the Northern Virginia/Washington, DC metro area, housing inventory is down to 2003/2004 boom-market levels. In fact, the housing supply numbers in Loudoun County are indicative of a seller’s market. We’re seeing multiple offer situations on many almost every property on the market priced below market value (feel free to ask any buyer or agent in my area to confirm that).
It was inevitable that the foreclosure moratoriums would just delay the foreclosure proceedings and eventual bank-owned market inventory. The question is when and how all those bank-owned properties will hit the open market and how great of an impact that influx of inventory will have. If all of these foreclosure properties hit the market at relatively the same time, inventory will go up and we’ll see downward pressure on prices. That would not be good.
Do I think all these foreclosures will hit the market at the same time? Personally, I doubt it - especially if the government has anything to do with it.
Look if the banks or real estate people withold these homes in an attempt to raise the value I.E. supply and demand. This is considered “inflation for profit” and according to the FBI’s definition this constitutes mortgage fraud. It’s bad but hey just release them and get this whole crisis put behind us. What’s wrong with those who have not purchased a home getting the best fair deal possible?
jcjc,
The problem is - good luck proving it. And how do we know that the government themselves didn’t have a part in the staggered release of foreclosure inventory on to the market?
And some may see it this way… If the banks flood the market with inventory, prices will drop even further. This will cause more homeowners to say, “Screw it!” and just walk away from their homes which will lead to even more foreclosures, broad economic turmoil, etc.