Upcoming Foreclosures

What will the amount of foreclosures do to the real estate market?

I have not been able to find the numbers, however from what I understand banks have a significant amount of them on their books. What I mean by significant is that there are enough that might matter to new developments.

Public Comments

1. The number of foreclosures on the books is not known for sure (and it is a changing number), but estimates say that the number of foreclosures could increase the number of houses on the real estate market by 30% to as much as 50%. These foreclosures can and will affect both the demand for single family housing and also keep home prices down. Like anything in the real estate market some areas are affected more than others.
2. I don't think anyone can give you an exact answer, and it varies market to market as well. Still, I think (though foreclosures are a huge problem) it might help to look at the problem diffrerently. If there are 100 million houses and 100 million people who want to and can buy the places and the market is growing (ie the popultion is going up) then all available houses will get bought and more will be needed to house the growing population - doesn't matterif the houses are foreclosures are not, they will get bought, at the right price. The problem is, when the real estate market bubbled, they was way to much overbuilding, so in many areas there are more (sometimes alot more) houses than people who want to live in them. So, how bad is the overbuilding in your area, and how long before the population will grow to suck up the excess. Anyhow, I believe the overbuilding will hold back the market for years, but eventually the excess will get bought and things can start moving along again. For some areas the excess is already gone, but for others this process could take 10 years plus.
3. there are supposed to be a lot more foreclosures coming than have already happened, so that will keep house prices down for some time - more houses available will certainly depress teh price of homes in new unfinished developments - but if you are buying a new house in a development, you should be looking to stay there at least 10-15 yrs, and once the development is finally finished and sold out - if it is a desirable area, prices may rise at higher than normal rate
4. builders are screwed for a while. new construction is 30% higher than existing home prices right now due in part to high rate of foreclosures. Very few will build right now.
5. The Real Estate Market is different in each City. And is different in each neighborhood within each City. In my area I have found a few neighborhoods where a huge majority of the properties for sale are foreclosures. Those foreclosures are often in horrible shape and have often had things stolen from them. They sell for a fraction of what they would have sold if they were well taken care of and lived in by an owner/occupant. In those neighborhoods the values have taken a very hard beating. In my area very few builders have had brand new homes taken from them in foreclosure- but the sales are so much lower than they were a couple of years ago that some vacant lots have been foreclosed on and I have not seen a new development in over a year. There are also established neighborhoods that seemed to attract older people that often paid cash. Those neighborhoods have almost no foreclsoures and the values have not been hard hit at all. As to your comment about the number of homes banks are acrrying on their books--I think in several cases some banks are delaying foreclsoures so that the numbers will look artifically low. I don't think any statistics on a region wide basis will be very helpful. The best statistics are the surveys that ask Brokers to compare things to this same month a year ago in their area- or the last thirty days to the previous thirty days. They often ask if the Broker thinks prices are going down in their area or how much activity they have seen. The report shows results area by area and gives at least a rough idea of which direction the arrow is pointing for the future. If you are trying to examine your own area you will need to start gathering similar data from people on the front line that you trust. Government figures should be taken with a huge amount of salt.
6. It will drag down values of homes.
7. Neighborhoods with a significant number of "sold" foreclosures are considered to be in a "declining market" thereby requiring an appraiser to include foreclosures in their comparable market analysis. Even if say the subject property is not a distressed property (foreclosure or short sale*), an appraiser will include a foreclosure among their comparable properties because in that particular market prices have been dropping due to the increased number of foreclosures. Naturally, as a result, all the properties in that neighborhood suffer with declined values. *Short sale means the bank will accept less than what is owed. For example, say the owner owes $100,000 but it's valued at about $80,000, then they'll approve a short sale and accept $80,000. Foreclosures and Short Sales are both considered "distressed" properties.
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