Where is the Foreclosure Tsunami?
Where is the Foreclosure Tsunami? Apparently myself, my clients, my blog readers, and pretty much all of San Diego county is waiting for this flood of foreclosed homes to hit the market. I have not seen it.
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Earlier this year, there was a Federal mandate putting a stop to foreclosures for about 3 months, during the spring. When that ended, banks started processing foreclosures again. It usually takes about 3 months for them to go through the whole process. If we assume that the end of the foreclosure moratorium was May 31, then we should see inventories off foreclosed homes pop up about the middle of August 2009. Again, no such scenario.
Why you ask. I have a theory.
A bank's primary purpose is the make money. If they are trying to liquidate their foreclosure property for maximum dollar, although highly discounted, why would the banks shoot themselves in the foot by flooding the real estate market. If foreclosure banks dumped all their property into the market, basic economic rules apply regarding the supply versus demand rule. If there are lots of supply in houses and the demand is still the same, then the current houses must compete for the same buyer supply of owners. If you double or triple the size of the inventory, then competition heats up and home prices are the only thing to differentiate homes from one another. In the end banks would get less money. Banks don't want that to happen.
Perhaps, the banks are slowly trickling in their foreclosure inventory into the housing market so that they can still maintain the current price competition and reduce their bad debt (foreclosed property) inventory. It's a theory of mine and since I don't work for a foreclosure bank, I don't have the reasoning of those people.
Why else would banks not be unloading their foreclosure inventory? I invite your comment, insight, and opinion as always.
Written by Jeffrey Luzadas, REALTOR specializing in Otay Ranch Real Estate, Eastlake Real Estate, Winding Walk Real Estate, Sunbow Real Estate, 4S Ranch Real Estate, Poway Real Estate, Mira Mesa Real Estate, Paradise Hill Real Estate, Rancho San Diego Real Estate, and Claremont Real Estate
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