Analysts Predict US Housing Shakeup Due to Foreclosure Halts

The US housing market is expected to be shaken by the recent foreclosure halts announced by a number of US home lenders. Experts predict prices may rise in the immediate future, but the eve(500)ntual placing of foreclosure properties on the market will be detrimental in the long term.
The announcement by lenders such as Bank of America, JPMorgan Chase, and Ally Financial last week that they would temporarily halt their home seizures means that prices will rise in many areas as the overall inventory of cheap foreclosures are lifted from the market.
While the news of higher prices in the short term is good news for the struggling market, the effects are likely to be temporary. The short-term boost to real estate prices is likely to be reversed once the foreclosure halts are ended, effectively hindering a long-term recovery in home prices.
The move to halt foreclosures by major US banks was brought about by revelations of questionable procedures in their foreclosure procedures. Reports surfaced that thousands of foreclosures were processed by so-called “robo-signers”, who signed off on or notarized critical foreclosure documents daily without verifying the their authenticity. Shold other lenders follow suit, the impact on the market could be increased significantly.
Sales of distressed properties currently make up nearly one-third of all home sales, according to a recent estimate by the real estate research firm RealtyTrac, and the effect on the market of those sales is 26 percent lower prices overall. Because of the foreclosure moratorium, fourth-quarter prices are likely to be considerably higher because the removal of so many properties that would otherwise be on the market’s lower end.
Analysts predict that the moratoriums on foreclosures could force lenders to pursue a greater number of short sales, where the lender agrees to allow the homeowner to sell the property at a price lower than the the remaining balance on the mortgage. Homes sold through short sales are typically discounter about 15 percent, compared to the 35 percent discount regularly seen on a foreclosed-property sale.
Some analysts predict the halt in foreclosures will considerably slow down the pace of home sales, as buyers looking for huge discounts wait around for the moratoriums to end. Should the foreclosure halts persist for a prolonged period, it could also drive investors, who have just recently began to return to real estate investing, to look for alternative investment opportunities.
In addition, areas with high numbers of foreclosed properties could see their overall property values dip because houses will remain vacant longer, delaying a correction in the market. -Jason Fendell
Colorado Springs Homes & Condos
