REO Listings – Another record for new REO properties
Bank repossessions hit a new high for the second month in a row
Bank repossessions, home actual foreclosure and conversion to REO property, hit a record high in May 2010 for the second month in a row, according to foreclosure experts RealtyTrac. Lenders repossessed a total of 93,777 homes, an increase of 1 percent from April and 44 percent from May of last year.
At the same time, new foreclosure activity was down slightly month-over-month (but still up from May of last year). Experts, however, see that small decline as a sign that banks are too busy dealing with old foreclosures to start new ones.
According to Rick Sharga, Senior Vice President of RealtyTrac, “… lenders are focusing on processing the delinquent loans they already have instead of initiating new foreclosures. They are managing inventory to prevent a free fall in home prices.” .
Real estate analysts have long hoped that REO owners will finally be forced to deal with this “shadow inventory” of REO properties, estimated by some to be in the millions. More than 3 million homes are expected to receive foreclosure notices in 2010, more than in 2009. In May, Nevada continued to have the highest foreclosure activity and Vermont the lowest of the 50 states.
How will banks manage this giant buildup of REO homes? Bank of America is reportedly encouraging short sales and other foreclosure alternatives, but that still won’t prevent the sheer volume of foreclosures to come.
“It won’t be enough to offset all the foreclosure loans,” says Bob Caruso of Lender Processing Services. “The volume keeps coming in so strong that short sales will only be a small fraction of the loans that are being taken out.”
Furthermore, the government’s Home Affordable Modification Program (HAMP), which was supposed to help homeowners avoid foreclosure and subsequent conversion to REO properties, has been shown to only postpone the inevitable. That will drive more foreclosures in the coming months. HAMP has also tightened its criteria, making it difficult for homeowners to participate due to the program’s high failure rate to date.
All of the above data continues to confirm that REO prices will continue to rise through the remainder of 2010, as well as into 2011 and beyond. Nearly half of all potential homebuyers are specifically interested in buying an REO home because of value and REO sales are expected to be double last year.
More and more REO professionals will continue to be in demand to handle these specialized real estate transactions in the coming months. Training to become an REO agent and learning how to get REO listings will be a great career choice as another recession is currently threatening America in the coming months.
