Another Surge of Homes?
According to the LA times, there are currently 1.7 million homes about to hit the market. The number includes homes that have been foreclosed in the past 90 days, and may not be up yet for sale, and the homes where owners are more than 90 days delinquent on their accounts, putting them at a high risk for foreclosure.
The question is, how quickly will these homes be released into the market? If these homes are dumped onto an already struggling market, things are going to go right back down hill, starting with market prices. Why buy a home for $300,000 when you can get a similar foreclosure for $250,000? Sellers will have to lower their prices to compete, and a home is only worth what someone is willing to pay for it.
Of course, if banks hold these homes back, and continue to foreclose on homes at the current rate, there will be a huge inventory of homes sitting empty, with no one trying to buy them from the bank. Empty homes bring down market values in the community, and can become a safety hazard.
Ideally, lenders and homeowners facing financial difficulties work together towards permanent loan modifications that will help the owner to stay in their home. Without this, the problem with the foreclosure inventory is going to take a long time to get better.
Home prices in California have been going up over the past couple months. Although the prices might stall out for a while, they shouldn’t drop again as badly as before, unless the entire foreclosed inventory hits all at once. If anything is going to happen, it’ll happen in the next few months, as the new year begins. If banks try to unload as many homes as possible before the home buyer credit ends in the end of April.