Monday, January 9, 2012

Look for foreclosures to begin in earnest again and home prices to fall

In a report today from CNBC, the Obama administraton is planning to implement a new program to take the hundreds of thousands of government owned (Fannie/Freddie) foreclosures and dump them onto the markets in a pilot program.

The Obama administration, in conjunction with federal regulators and led by the overseer of Fannie Mae and Freddie Mac, is very close to announcing a pilot program to sell government-owned foreclosures in bulk to investors as rentals, according to administration officials.

There currently are about a quarter of a million foreclosed properties on the books of Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA), and millions more are coming.
The foreclosure processing delays of last year created a mammoth backlog of properties yet to be processed, which are just now being re-started. One of the initiatives of this program is for the federal government to be in the position to mitigate and manage any new wave of foreclosures, sources say. - CNBC via Yahoo

The end result will be two-fold here.  First, home prices are still falling in most major metro areas, and this will only drive prices down even more.  Secondly, with the government choosing to dump their foreclosure inventories, how many banks that own millions of homes in the shadow inventory will be pressed to do the same, and dump their stock in a 'last one to the door' effort?

Either way, expect home values to continue to fall around the country, or at best, remain stagnant for more years to come.


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