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Mortgage Settlement to Drive Increase in Foreclosures

Last week, we explained that the National Mortgage Settlement gave banks a roadmap showing them how to proceed with the backlog of foreclosures (known as shadow inventory) that has been hanging over the housing market for more than a year. We believe that understanding this dynamic is crucial in determining home prices as we go through the year. We believe the number of houses sold will grow somewhat dramatically in 2012. However, the increase in demand will be offset by an increase in supply of distressed properties that sell at a discount.

Others also feel there will be an increase in foreclosures as we move through the year.

Calculated Risk

“It does appear the number of completed foreclosures will increase following this settlement – especially in some judicial states with large backlogs – so there will probably be more REOs (lender Real Estate Owned) for sale.”

Brandon Moore, chief executive of RealtyTrac

“The settlement sets forth clear guidelines for lenders and servicers to follow when foreclosing, which should allow them to push through some of the delayed foreclosures from last year.”


Susan Wachter, professor of real estate and finance, University of Pennsylvania’s Wharton School

“There remains a danger that ‘a wave of foreclosures’ may destabilize the housing market. The logjam has to be unleashed – [the settlement] will do that.”

Mark Zandi, chief economist Moody’s Analytics

“I think there’ll be more price weakness, because we’ll see the number of distressed sales pick up. But I think the price declines will be modest.”

What does ‘modest’ mean? Celia Chen, Moody’s Analytics suggests:

“The latest settlement will hasten the pace of filings and push up the distress sale share of total sales over the next several quarters, driving national house prices down another 3%.”

Bottom Line

The increase in supply will cause prices to soften even though we will see an increase in demand. Check with a real estate professional to help you understand how this will impact your local market.

Attention Real Estate Professionals

Watch the replay of our free webinar on shadow inventory here.


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44 replies
  1. Rick
    Rick says:

    Is the question of how much shadow inventory is being held dependent upon whether or not a state has a non-judicial foreclosure (trustees sale) option?    I live in Arizona where almost all homes are taken back by trustees sale.  Will there be an increase in foreclosures here also as a result of the settlemen?

    Reply
    • KCMcrew
      KCMcrew says:

      Arizona and other non-judicial states have done a better job of clearing their distressed property inventory than judicial states have. That means they will not be impacted as much as other states (examples: NY & NJ). It doesn’t mean there will be no effect, just a lesser one.

      Reply
  2. Brad Bergamini
    Brad Bergamini says:

    I agree Arizona will not see the big changes but our buyers do come from some of these states. Their market will splightly affect ours. 
    Good Point. 

    Reply

Trackbacks & Pingbacks

  1. […] a backlog of foreclosed properties which were delayed by the court procedures in those states. The National Mortgage Settlement gave the banks a clear path for releasing these distressed properties. Therefore, in several […]

  2. […] currently on the market) is shrinking, there is still a large overhang of ‘shadow’ inventory (foreclosures about to come to market as a result of the National Mortgage Settlement). This increase in inventory will outpace the […]

  3. […] a backlog of foreclosed properties which were delayed by the court procedures in those states. The National Mortgage Settlement gave the banks a clear path for releasing these distressed properties. Therefore, in several […]

  4. […] a backlog of foreclosed properties which were delayed by the court procedures in those states. The National Mortgage Settlement gave the banks a clear path for releasing these distressed properties. Therefore, in several […]

  5. […] a backlog of foreclosed properties which were delayed by the court procedures in those states. The National Mortgage Settlement gave the banks a clear path for releasing these distressed properties. Therefore, in several […]

  6. […] a backlog of foreclosed properties which were delayed by the court procedures in those states. TheNational Mortgage Settlement gave the banks a clear path for releasing these distressed properties. Therefore, in several […]

  7. […] a backlog of foreclosed properties which were delayed by the court procedures in those states. The National Mortgage Settlement gave the banks a clear path for releasing these distressed properties. Therefore, in several […]

  8. […] a backlog of foreclosed properties which were delayed by the court procedures in those states. The National Mortgage Settlement gave the banks a clear path for releasing these distressed properties. Therefore, in several […]

  9. […] a backlog of foreclosed properties which were delayed by the court procedures in those states. The National Mortgage Settlement gave the banks a clear path for releasing these distressed properties. Therefore, in several […]

  10. […] a backlog of foreclosed properties which were delayed by the court procedures in those states. The National Mortgage Settlement gave the banks a clear path for releasing these distressed properties. Therefore, in several […]

  11. […] a backlog of foreclosed properties which were delayed by the court procedures in those states. The National Mortgage Settlement gave the banks a clear path for releasing these distressed properties. Therefore, in several […]

  12. […] a backlog of foreclosed properties which were delayed by the court procedures in those states. The National Mortgage Settlement gave the banks a clear path for releasing these distressed properties. Therefore, in several […]

  13. […] a backlog of foreclosed properties which were delayed by the court procedures in those states. The National Mortgage Settlement gave the banks a clear path for releasing these distressed properties. Therefore, in several […]

  14. […] a backlog of foreclosed properties which were delayed by the court procedures in those states. The National Mortgage Settlement gave the banks a clear path for releasing these distressed properties. Therefore, in several […]

  15. […] a backlog of foreclosed properties which were delayed by the court procedures in those states. The National Mortgage Settlement gave the banks a clear path for releasing these distressed properties. Therefore, in several […]

  16. […] a backlog of foreclosed properties which were delayed by the court procedures in those states. The National Mortgage Settlement gave the banks a clear path for releasing these distressed properties. Therefore, in several […]

  17. […] admin on Apr 18, 2012 in Economy We reported two months ago that foreclosures will significantly increase this summer as a result of The National Mortgage […]

  18. […] reported two months ago that foreclosures will significantly increase this summer as a result of The National Mortgage […]

  19. […] reported two months ago that foreclosures will significantly increase this summer as a result of The National Mortgage […]

  20. […] Blog reported two months ago that foreclosures will significantly increase this summer as a result of The National Mortgage […]

  21. […] What Will Be the Impact? Posted by Craig Adelman on Wednesday, April 18th, 2012 at 8:49am. We reported twomonths ago that foreclosures will significantly increase thissummer as a result of TheNational Mortgage […]

  22. […] We reported two months ago that foreclosures will significantly increase this summer as a result of The National Mortgage Settlement. This month, both Reuters (Americans brace for next foreclosure wave) and CNNMoney (Flood of foreclosures to hit the housing market) concurred. However, we believe this increase in distressed properties will have a much different impact on the housing market than previous increases for three reasons. […]

  23. […] reported two months ago that foreclosures will significantly increase this summer as a result of The National Mortgage […]

  24. […] currently on the market) is shrinking, there is  still a large overhang of ‘shadow’ inventory (foreclosures about to come to market as a result of the National Mortgage Settlement). This increase in inventory will outpace the […]

  25. […] currently on the market) is shrinking, there is still a large overhang of ‘shadow’ inventory (foreclosures about to come to market as a result of the National Mortgage Settlement). This increase in inventory will outpace the […]

  26. […] currently on the market) is shrinking, there is still a large overhang of ‘shadow’ inventory (foreclosures about to come to market as a result of the National Mortgage Settlement). This increase in inventory will outpace the […]

  27. […] currently on the market) is shrinking, there is  still a large overhang of ‘shadow’ inventory (foreclosures about to come to market as a result of the National Mortgage Settlement). This increase in inventory will outpace the […]

  28. […] currently on the market) is shrinking, there is still a large overhang of ‘shadow’ inventory (foreclosures about to come to market as a result of the National Mortgage Settlement). This increase in inventory will outpace the […]

  29. […] currently on the market) is shrinking, there is still a large overhang of ‘shadow’ inventory (foreclosures about to come to market as a result of the National Mortgage Settlement). This increase in inventory will outpace the […]

  30. […] currently on the market) is shrinking, there is still a large overhang of ‘shadow’ inventory (foreclosures about to come to market as a result of the National Mortgage Settlement). This increase in inventory will outpace the […]

  31. […] currently on the market) is shrinking, there is still a large overhang of ‘shadow’ inventory (foreclosures about to come to market as a result of the National Mortgage Settlement). This increase in inventory will outpace the […]

  32. […] currently on the market) is shrinking, there is  still a large overhang of ‘shadow’ inventory (foreclosures about to come to marketas a result of the National Mortgage Settlement). This increase in inventory will outpace the […]

  33. […] currently on the market) is shrinking, there is still a large overhang of ‘shadow’ inventory (foreclosures about to come to market as a result of the National Mortgage Settlement). This increase in inventory will outpace the […]

  34. […] currently on the market) is shrinking, there is  still a large overhang of ‘shadow’ inventory (foreclosures about to come to market as a result of the National Mortgage Settlement). This increase in inventory will outpace the […]

  35. […] foreclosures about to come to market as a result of the National Mortgage Settlement). This increase in inventory will outpace the increase in demand and thereby cause prices to continue to soften in many parts of the country. […]

  36. […] currently on the market) is shrinking, there is still a large overhang of ‘shadow’ inventory (foreclosures about to come to market as a result of the National Mortgage Settlement). This increase in inventory will outpace the […]

  37. […] currently on the market) is shrinking, there is still a large overhang of ‘shadow’ inventory (foreclosures about to come to market as a result of the National Mortgage Settlement). This increase in inventory will outpace the […]

  38. […] currently on the market) is shrinking, there is  still a large overhang of ‘shadow’ inventory (foreclosures about to come to market as a result of the National Mortgage Settlement). This increase in inventory will outpace the […]

  39. […] currently on the market) is shrinking, there is a still large overhang of ‘shadow’ inventory (foreclosures about to come to market as a result of the National Mortgage Settlement). This increase in inventory will outpace the […]

  40. […] link: Mortgage Settlement to Drive Increase in Foreclosures Segnala presso: This entry was posted in Uncategorized and tagged backlog, been-hanging, […]

  41. […] (known as shadow inventory) that has been hanging over the housing …Read the original here: Mortgage Settlement to Drive Increase in ForeclosuresRelated posts:$25 billion mortgage settlement could help foreclosures in Horry …National […]

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