Pent-Up Bank Owned Inventory Could Soon Flood The Housing Market

Foreclosures took a slight dip in September from the previous month, but are up significantly compared to this period last year. In addition, REO sales have increased, ridding …

Foreclosures took a slight dip in September from the previous month, but are up significantly compared to this period last year. In addition, REO sales have increased, ridding lenders of some of the pent-up inventory. However, this could lead to the crippling of home values if too many foreclosures start to flood the market. For more on this, see the following article from HousingWire.

According to RealtyTrac, one in every 136 homes in the US received a foreclosure filing during Q309, the highest reported quarterly foreclosure rate since RealtyTrac began issuing its report in the first quarter of 2005.

Foreclosure filings increased 5% from the previous quarter and climbed 23% from Q308, according to the report. Nearly 938,000 homeowners received a foreclosure filing in Q309.

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Filings in September dipped 4% from the month before but jumped 29% from September 2008. Despite the monthly decrease, September registered the third highest monthly total since RealtyTrac began reporting – trailing only July and August of 2009.

Real estate owned (REO) sales rose 21% from the second quarter to the third quarter, which mirrors increases in defaults and scheduled auctions in the first two quarters of 2009, said James Saccacio, chief executive officer of RealtyTrac.

“REO activity increased from the previous quarter in all but two states and the District of Columbia, indicating that lenders may be starting to work through some of the pent-up foreclosure inventory caused by legislative delays, loan modification efforts and high volumes of distressed properties,” Saccacio said.

When HousingWire reported on the recent housing price decline in August, Dave McCarthy, the president and CEO of Integrated Asset Services (IAS) said that a “shadow inventory” of foreclosed homes that aren’t listed on the market and remain unsold could potentially arrest the housing recovery.

“When the shadow supply hits the market, home prices will be pressured, particularly in markets with large numbers of foreclosures,” McCarthy said.

This article has been republished from HousingWire. You can also view this article at
HousingWire, a mortgage and real estate news site.

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