The above title, from blog Naked Capitalism, describes housing's foreclosure shadow inventory well. According to a study by Capital Economics, there are 7.8 million homes in the foreclosure process, and 3.9 million homes for sale.
That's partly because banks are delaying the foreclosure process, hoping to modify loans and save the house, or to negotiate a short sale. As a result, the rate of foreclosures fell another 3% in June, after dropping 3% in May and 9% in April.
In June, 313,841 homes received foreclosure filings, the 16th month in a row that foreclosures have been over 300,000 a month. However, the trend is in the right direction - down!
What It Means to You
What is housing's "shadow inventory?" These are homes that are somewhere in the foreclosure pipeline. It could take another year before they are finally sold at auction. This will keep housing prices at current low levels. The good news is that housing prices shouldn't fall lower, despite Capital Economics' claim of a double-dip recession in housing prices.
Why? Remember - claims that "the sky is falling" usually accompany the end of a recession, just like the top of a bull market is heralded by claims that "good times will last forever." Second, there are a lot of potential investors and homebuyers waiting (and waiting and waiting) until confidence is restored to the housing market. Once it looks like prices are definitely going up, they will enter in force. Housing prices could pop up surprisingly fast. The only problem is - no one (not even Capital Economics) knows exactly when that will be.
If You're Facing Foreclosure
Fannie Mae and Freddie Mac are working with the Treasury Department's MakingHomeAffordable to prevent foreclosures.This grew out of the HOPE NOW program to offer a streamlined loan modification process.
Even borrowers who are "upside down" in their mortgage can apply, as Fannie Mae will refinance loans up to 105% of a home's value. Existing mortgages can also be modified by reducing interest rates or lengthening the payment time frame to bring monthly payments down to 31% of the borrower's income. To find out if you are eligible, go to Making Home Affordable"
Related Articles
- Understanding the Foreclosure Process
- Treasury Expands MakingHomeAffordable
- Shadow Inventory Means Home Prices Are Staying Flat
(Credit: Justin Sullivan/Getty Images)
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Comments
Recently China changed its currency to “floating” type. What does it mean, and what implications do they have? Next, why does China’s currency hold so much of an advantage over the countries? Thanks
Hi Josh,
China hasn’t completely released its peg to the dollar – it just allowed it to “float” a teensy bit more freely.
For more explanation than I can give here, read
How Does China Influence the U.S. Dollar?. Click on all the links in the article. If you need more info, there is a search box at the top of the page. Search for “global currency” and it will lead you to a whole slew of articles that I’ve written about China, the dollar and their relative power.
Kimberly