The nation's biggest banks and mortgage lenders have acquired a glut of foreclosed homes that threatens to deepen the housing slump and create a further drag on the economic recovery, according to an front-page article in today's edition of The New York Times by Eric Dash.
"All told," the article said, "they own more than 872,000 homes as a result of the groundswell in foreclosures, almost twice as many as when the financial crisis began in 2007, according to RealtyTrac, a real estate data provider. In addition, they are in the process of foreclosing on an additional one million homes and are poised to take possession of several million more in the years ahead."
"Five years after the housing market started teetering," the article continued, "economists now worry that the rise in lender-owned homes could create another vicious circle, in which the growing inventory of distressed property further depresses home values and leads to even more distressed sales. With the spring home-selling season under way, real estate prices have been declining across the country in recent months."
The article said that Mark Zandi, the chief economist of Moody's Analytics, said that "housing prices are falling, and they are going to fall some more."
"Although sales have picked up a bit in the last few weeks," the article said, "banks and other lenders remain overwhelmed by the wave of foreclosures. In Atlanta, lenders are repossessing eight homes for each distressed home they sell, according to March data from RealtyTrac. In Minneapolis, they are bringing in at least six foreclosed homes for each they sell, and in once-hot markets like Chicago and Miami, the ratio still hovers close to two to one. Before the housing implosion, the inflow and outflow figures were typically one-to-one. The reasons for the backlog include inadequate staffs and delays imposed by the lenders because of investigations into foreclosure practices. The pileup could lead to $40 billion in additional losses for banks and other lenders as they sell houses at steep discounts over the next two years, according to Trepp, a real estate research firm."
The major lenders say they are not deliberately holding back any foreclosed homes, the article said, and they say that a long sales process can stigmatize a property and ratchet up maintenance and other costs.
The biggest reason for the backlog is that it takes longer to sell foreclosed homes, currently an average of 176 days - and that's after the 400 days it takes for lenders to foreclose.
The article said that "realty agents and buyers say the lenders are simply overwhelmed. Just as lenders were ill-prepared to handle the flood of foreclosures, they do not have the staff and infrastructure to manage and sell this much property. Most of the major lenders outsourced almost every part of the process, be it sales or repairs. Some agents complain that lender-owned home listings are routinely out of date, that properties are overpriced by as much as 10 percent, and that lenders take days or longer to accept an offer."
"All told," the article said, "they own more than 872,000 homes as a result of the groundswell in foreclosures, almost twice as many as when the financial crisis began in 2007, according to RealtyTrac, a real estate data provider. In addition, they are in the process of foreclosing on an additional one million homes and are poised to take possession of several million more in the years ahead."
"Five years after the housing market started teetering," the article continued, "economists now worry that the rise in lender-owned homes could create another vicious circle, in which the growing inventory of distressed property further depresses home values and leads to even more distressed sales. With the spring home-selling season under way, real estate prices have been declining across the country in recent months."
The article said that Mark Zandi, the chief economist of Moody's Analytics, said that "housing prices are falling, and they are going to fall some more."
"Although sales have picked up a bit in the last few weeks," the article said, "banks and other lenders remain overwhelmed by the wave of foreclosures. In Atlanta, lenders are repossessing eight homes for each distressed home they sell, according to March data from RealtyTrac. In Minneapolis, they are bringing in at least six foreclosed homes for each they sell, and in once-hot markets like Chicago and Miami, the ratio still hovers close to two to one. Before the housing implosion, the inflow and outflow figures were typically one-to-one. The reasons for the backlog include inadequate staffs and delays imposed by the lenders because of investigations into foreclosure practices. The pileup could lead to $40 billion in additional losses for banks and other lenders as they sell houses at steep discounts over the next two years, according to Trepp, a real estate research firm."
The major lenders say they are not deliberately holding back any foreclosed homes, the article said, and they say that a long sales process can stigmatize a property and ratchet up maintenance and other costs.
The biggest reason for the backlog is that it takes longer to sell foreclosed homes, currently an average of 176 days - and that's after the 400 days it takes for lenders to foreclose.
The article said that "realty agents and buyers say the lenders are simply overwhelmed. Just as lenders were ill-prepared to handle the flood of foreclosures, they do not have the staff and infrastructure to manage and sell this much property. Most of the major lenders outsourced almost every part of the process, be it sales or repairs. Some agents complain that lender-owned home listings are routinely out of date, that properties are overpriced by as much as 10 percent, and that lenders take days or longer to accept an offer."
Architecture Critic
Carter Horsley
Since 1997, Carter B. Horsley has been the editorial director of CityRealty. He began his journalistic career at The New York Times in 1961 where he spent 26 years as a reporter specializing in real estate & architectural news. In 1987, he became the architecture critic and real estate editor of The New York Post.
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