In May, foreclosures rose 9%. Though this sounds bad, the news is actually good. A rise in foreclosures corresponds to a decrease in the shadow inventory - homes with loans in default that are ripe for foreclosure, but have not entered the market. Currently, there is an artificial downward pressure on home prices because so many houses can be had cheep at foreclosure sales. Any seller in this current market will have noticed that buyers are expecting fire sale prices even on non-distressed properties. Until that shadow inventory is cleared, house prices will not stabilize to a normal level (whatever the new normal ends up being). So while it's not exactly the kind of news you open a bottle of champagne for, the increase in foreclosure is still a good sign for the current recovery.
Foreclosure Spike Is Positive News For Housing
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