Although “millions of distressed properties could be put up for sale at any moment” should lenders decide to release the many foreclosures that they are holding off the market onto the market at once, these numbers represent slightly less of a potential disaster today than they did a month ago. According to Standard & Poor, if the banks did decide to “purge” their shadow inventory of foreclosures, it would now take “only” 47 months to do so instead of 52, as estimated earlier this year. Furthermore, the projected dollar value on the loans on these properties has also fallen by $28 billion from the first quarter. Diane Westerback, S&P’s managing director of global surveillance analytics, says that this is “good news that things are starting to slow down and we’re getting closer to the end of the problem.” She believes that the slight improvements are a result of stabilizing liquidation rates and fewer borrowers falling behind on their mortgage payments and credits tightened lending standards with a major role in this progress.
For the purposes of this report, S&P defined shadow inventory properties as “a collection of properties in a 90-day delinquency or worse, foreclosure and REO”. S&P analysts warn that things are still probably going to get worse before they get better, saying that “if and when [servicers are able to improve liquidation times] an influx of homes will likely enter the market, increasing supply and driving prices down further.”
Do you believe the S&P about the shadow inventory? Is it possible to really know what is going to happen to houses we don’t even know for sure are going on the market?
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