WaPo: Delinquent Properties Could End Good News For Housing Market

• March 12, 2010
• 7 Comments

by Mark Wellborn

The Washington Post had a sobering article in today’s paper about the millions of delinquent properties in the U.S. that have yet to be foreclosed on, and the effect that these properties could eventually have on the country’s housing market.

According to the Post, approximately “5 million to 7 million properties are potentially eligible for foreclosure but have not yet been repossessed and put up for sale.” If these properties come on the market en masse, housing prices would drop across the country and the wave of good news about the progress that the housing market has been making would likely end for awhile.

From The Post:

“Some of the positive housing data may not be signaling a true turning point, as many servicers are holding back on foreclosures and the related houses are not yet being offered for sale,” said Diane Westerback, a managing director at Standard & Poor’s.

Data released Thursday by RealtyTrac illustrate the dynamic. While banks repossessed fewer homes in February than a month earlier, borrowers continued to fall behind on their payments, adding to the inventory of properties headed toward foreclosure that have yet to be put on the market, said Daren Blomquist, RealtyTrac’s spokesman.

The article notes that the DC area has an inventory of about 67,000 foreclosed properties that have yet to hit the market, a number that is slightly higher than the national average, but nowhere near as bad as cities like Orlando and Miami.

This article originally published at http://dc.urbanturf.com/articles/blog/wapo_delinquent_properties_could_end_good_news_for_housing_market/1870

7 Comments

1. jy said at 4:07 pm on Friday March 12, 2010:

   How exactly is this bad news?

1. brett said at 4:48 pm on Friday March 12, 2010:

   this seems like standard “delay and pray” tactics seen across the financial universe.

   as long as the shadow inventory isn’t suddenly dumped on the market, it shouldn’t be a huge deal.

   The other part of the problem is the new construction side, but those inventories have been significantly reduced. this is a sign they should stay that way in the near term.

1. brett said at 4:50 pm on Friday March 12, 2010:

   also, realtytrac is in the business of selling foreclosure data to potential buyers, so they occupy kind of a weird space. their business model has been hurt by the pervasiveness of foreclosures, so to the extent that the “shadow” inventory is something you need to pay to gain access to, that helps them.

1. SWester said at 6:13 pm on Friday March 12, 2010:

   But where is the indication that these properties will come onto the market “en masse”, as the Post threatens?

   Furthermore, I think buyers have come to view the foreclosure “market” as a sub-market that operates on a very different track than the real estate market at large. The extra work and risks involved are a turn-off to a lot of non-investor buyers, and the effect that foreclosures have on the overall market pricing is probably less significant than it was a few years ago.

   I’m curious to hear some other opinions on this.

1. yo said at 8:25 pm on Friday March 12, 2010:

   this hardly seems like sobering news for lotsa people, who would love to see prices continue to drop.

1. Concentrist said at 9:42 pm on Friday March 12, 2010:

   It is just a matter of time.  The Fed will stop buying mortgages.  The securization market will remain broken.  The tax credit will end. Foreclosures will maintain the supply imbalance.  And the market will finally be able to adjust to pre-bubble levels.  Prices will drop.

1. Janson said at 11:00 am on Monday March 15, 2010:

   @Concentrist Though you sound, relative to others, like a pessimist, I think you have the most realistic perspective and name the most important factors, though you only hint at the possibility of increasing mortgage rates, which will hit prices hard.

   The question is really the slope of the downtrend: Will it be a real drop, or will we enter a Japanese style decade (three years already past) of sideways or slightly downward real estate pressure. As bad as it will be, homeowners might want to hope for a bit of inflation to take a bite out of the mortgage payment. Unfortunately, there doesn’t look like there’ll be any inflation in the next few years (according to long-dated Treasuries recently auctioned).

   I still think there will be local counter trends based on a few tight neighborhood markets, new services changing a few neighborhood profiles, and a trend toward urban living.

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