UberRealty.com

Foreclosure freeze shakes battered home marketThe growing number of freezes on home foreclosures is likely to shake up the struggling U.S. housing market.   Experts say home prices could rise in the short term, but the eventual glut of foreclosure sales could hurt the market in the long run.

The move by some major lenders such as Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Ally Financial to put some of their foreclosures on hold could help temporarily lift prices, by removing the inventory of bargain-basement foreclosed properties from the market. Freezing foreclosures?   What does that mean?

“You might get a false positive read on fourth quarter home prices because you’ll be eliminating a lot of sales at the bottom of the market,” he said.   “There are so many factors distorting the market, it’s tough to get an accurate read.” He thinks the freezes could cause lenders to move toward more short sales, in which the bank agrees to a sale for less than the balance of the mortgage.   That could lead to a more substantial impact on market prices.

“It might stimulate a little more short sale activity, as lenders and servicers look for ways to more efficiently move the property outside the foreclosure,” said Sharga.   “Typically your discount on short sales is only 15%, compared to 35% for a [foreclosure sale].” Just the level of uncertainty about the halt in foreclosures has the potential to depress home sales as buyers wait to see what foreclosed homes might be coming on the market in the future.

A prolonged delay in foreclosures could also hurt long-term prices by driving investors who had been returning to the real estate market to invest elsewhere. “Some of the money that is waiting to go to [into foreclosure sales] might evaporate and those sales could be lost,”

Regards,
Jim Whatley
Uber Realty
850.499.2940