According to a newly-released RealtyTrac report, banks are still holding, unlisted, 70 percent of REO properties[1]. That means that of all the REO properties currently on the market, only 300,000 of the estimated million homes that have been repossessed through foreclosure are actually available for sale. The report indicates that not only have foreclosure filings reached a new high in 2010, but that 2011 could see 4 million filings. Rick Sharga, senior vice president of RealtyTrac, believes that the numbers indicate that “you’re looking at a 2011 that will be worse that 2010, then some stabilization through 2012.” Not until 2013 will the market see “a more manageable number of REO,” said Sharga.
Another report released last week by Morgan Stanley indicates that in fact, most of the “shadow inventory” in the country is controlled by the nation’s major lenders rather than the popular perception that REO properties are mostly handled by government-controlled Fannie Mae and Freddie Mac[2]. The report hypothesizes that this may be due, in part, to “borrowers becoming delinquent at a faster rate for bank-held loans” and predicts that as the shadow inventory spreads outward from “hardest hit” areas and across the United States, “more than 8 million liquidations are in order over the next five years before housing stabilizes.”
With numbers like these, many investors are seriously considering ramping up their buying machines for 2011 and 2012. Experts agree that rental properties will demand higher and higher revenues as former homeowners, now evicted and foreclosed, seek new places to call home. Are you investing in the rental market in 2011?
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[1] http://www.housingwire.com/2011/01/31/realtytracs-sharga-banks-still-holding-70-of-reo-from-market
[2] http://www.housingwire.com/2011/01/28/banks-grip-on-prime-shadow-inventory-growing-morgan-stanley
