When a bank forecloses on a home, you probably think that sticking a “Bank Owned For Sale” sign in front of the property soon follows.
Or when a homeowner misses three, four or even nine months of payments, you probably think the bank’s next step is sticking an eviction notice on the door.
Generally speaking, you would [...]
When a bank forecloses on a home, you probably think that sticking a “Bank Owned For Sale” sign in front of the property soon follows.
Or when a homeowner misses three, four or even nine months of payments, you probably think the bank’s next step is sticking an eviction notice on the door.
Generally speaking, you would be correct. Every day banks are placing foreclosed properties on the market, and every day homeowners who default on home loans are receiving eviction notices. That just has to happen when some 350,000 homes a month, or more than 4 million a year, are being foreclosed on across the country.
But presuming that all those properties will hit the market in a timely fashion or that there’s a defined period for a foreclosure-related eviction, though, would be incorrect.
Fact is there are no prescribed time periods for either scenario. Because of this arbitrary manner in which homes become official statistics, there’s a chunk of homes that miss the radar screen of economists.
This “hidden inventory,” as it is known, is the subject of much debate.
Are banks holding back properties to keep prices stabilized in order to minimize loss on bank-owned sales?
Is incompetence coupled with an overwhelming number of foreclosures causing delays in homes hitting the market, skewering the actual real estate picture?
Sean O’Toole, founder and CEO of ForeclosureRadar, a Discovery Bay-based
tracking firm, is one of the few voices who believes there is no grand conspiracy by banks when it comes to the housing market. In California, he believes this hidden inventory represents about a month of backlogged homes that normally would be on the market.
On a recent post on the ForeclosureRadar.com, O’Toole wrote, “At the current rate of REO sales, that means that even if banks are purposefully withholding properties, the truth is that it can’t be very many — a month at most.”
While O’Toole’s math uses actual figures to extrapolate the hidden inventory number, the real wild card lives and breaths in those homes that are in limbo, here payments have stopped, the homeowners remain and the bank is doing nothing but waiting for who knows what. There is no official figure for those.
With the country looking at 4 million foreclosures this year, conspiracy theorists can look at these homeowners in limbo and use it as fuel for their argument that banks are manipulating the housing market by keeping them out of that statistical world by doing nothing.
My take: The housing market is at a critical junction, and there is a real potential for a flood of new foreclosures.
Along with the unknown number of properties in purgatory, there are some 1 million pay-option mortgages originated at the height of the real estate bubble that are due to reset throughout the next year. Some will see their payments double.
These prescription drugs online without prescription two unknown factors — homeowners in limbo and pay-option resets — do not appear to be taken as a serious threat in the real estate industry, but you can be sure they will certainly feed the foreclosure fire well into next year.
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