BAP Blog Several more years with nearly 1M foreclosures per year

It is being reported that the housing market faces several more years with 800,000 to 1 million new foreclosed properties per year. A recent analysis at Bank of America Merill Lynch estimated that REO sales would not peak until 2013 when nearly 1.5 million properties would be sold. Also according to RealtyTrac, there have been 8.9 million homes lost to foreclosure since 2007 which was the height of the credit crisis. The report doesn't see a spike happening, but rather a slow and steady burn in order to spare home prices from further reductions. Today, roughly 4 million homes sell per year. If the estimated 1.5 million REO's are sold, that would be almost 40% of the market and that would be double the current market share of these properties. It is possible that we’re not going to see a peak this year in REO sales and that dramatically different than what we’ve been seeing over the past few years. This would be partly due to relatively weak demand, partly due to inventory control that appears to be being executed by the lenders and servicers. This might be partly due to the fact that foreclosure processing, evictions and redemption periods have all become extended. The largest delay came when servicers were found to be improperly foreclosing on homeowners last year. As reported by RealtyTrac the delays, investigations and ongoing attorneys general settlement talks pushed more than 1 million foreclosures that were supposed to occur in 2011 to 2012. Another report states that mortgages facing foreclosure are delinquent an average of 611 days. Once a foreclosure is initiated it can take as long as 400 days to complete. With this type of delay a loan entering foreclosure in December 2011 won't hit the market as an REO until January or February 2013.