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Ahoy, Foreclosures Ahead

Blog Mar 14, 2013

On the surface, things in the ocean of real estate business, especially Foreclosures seem almost calm. But below the surface trouble may be brewing.

Good news/Bad news. In a report by an online repossession/sales data company, RealtyTrac, it states that banks are foreclosing on fewer homes. Repossessions are the final phase of foreclosure, and while they are down 29 percent form a year ago, foreclosure starts have surged 10 percent in February, up for January.

“At a high level the U.S. foreclosure inferno has been effectively contained and should be reduced to a slow burn in the next two years,” remarked Daren Blomquist, a RealtyTrac vice president. “But dangerous foreclosure flare-ups are still popping up in states where foreclosures have been delayed by a lengthy court process or by new legislation making it more difficult to foreclose outside of the court system. Foreclosure starts have been steadily building in those states over the last several months and likely will end up as bank repossessions or short sales later this year.”

In Nevada, where foreclosures have been ravaging the state, a recently enacted law against faulty foreclosures, has all but eliminated them. Nonetheless, the winds of change from February are being felt as numbers indicate that foreclosures have hit a 17 month high, a 334 percent jump from a year ago.

Similarly in California, where a law had been passed to protect homeowners, foreclosures appeared to be slowing last year only to see a spike in February, up 41 percent.

“While policy makers state that the purpose of government intervention is to help homeowners by delaying foreclosures, instead they have created an artificial shortage in bank-owned inventory (REO). The combination of the decline in REO inventory and lack of motivated sellers has left the California real estate market with an acute lack of inventory, which is putting upward pressure on prices,” say analysts at ForeclosureRadar.

Rats, there’s that darn law of unintended consequences.

It is generally believed that an increase in price helps the recovery. However, if increases happen too rapidly, prospective home buyers are priced out of the market, which in turn reduces sales. Many feel the price recovery has housing back in the game, but some are raising a cautionary flag that the home price upturn is due to a lack of homes for sale, which in turn is due to something that will be with us for some time, foreclosures.

Thumbnail Photo We believe that everyone deserves a properly developed strategy for financial safety.

Lynette Zang

Chief Market Analyst, ITM Trading

Sources & References In This Article

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