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Foreclosures Easing Up? Not Exactly

Foreclosures: Not What They Seem Like

There has been much conversation about how distressed properties will impact home prices as we move into the second half of 2010. And it appears that no matter how much data is available, there still remains a feeling that the situation is improving. People look at the foreclosure filings and say things are in fact stabilizing. Though that may be true regarding actually filings, it does not reflect the true challenge. Looking at filings is like looking at the symptom of a disease instead of the disease.

The ‘disease’ is that many families can no longer afford to pay their mortgage. The symptom is they go to foreclosure. There has been a tremendous effort to try and keep these families in their homes. This has only delayed the foreclosure process in most cases, not eliminated it.

I recently read an article in Housing Wire titled Housing Recovery is Spelled R-E-O. The part that jumped off the page was the quote below which was referring to LPS‘s current Mortgage Monitor:

On average, severely delinquent borrowers have gone more than 9 months without making a mortgage payment—and yet foreclosure has not yet started for them. For those borrowers who are in the foreclosure process, it’s been an average of 13.6 months—more than one full year—since they last made any payment on their mortgage.

We can see in the chart below that there are large percentages of homes that are 6, 12, 18 and 24 months behind in payments that have yet to have foreclosure procedures even started.

Will banks allow these people to live in the house rent-free forever? I think not. I think in the very near future banks will have to act on these properties and find a way to liquidate them.

What does that mean to you?

If you are a buyer, there will be ample inventory to pick from over the next few years as these properties come to market. If you are selling, these properties will be your competition. The result is rather obvious. Because of an increase in supply, there will continue to be downward pressure on prices.


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Trackbacks & Pingbacks

  1. […] on foreclosures. My favorite expert, Steve Harney, looks in detail at the foreclosure market in this article. Foreclosures will continue to drive the selling prices down, as banks start to release their […]

  2. […] their time and efforts repossessing the homes they had already foreclosed on? We already have reported that there are borrowers as much as two years in arrears on their mortgage payments that have yet […]

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