Banks have been in a state of limbo this year about what to do with repossessed houses, and so they have mostly held on to them in order not to add to the nation’s oversupply of homes for sale, Harney told the agents.
“The banks have been saying, ‘There has to be a number [the market] can hit where we can keep the river going without flooding the valley,'” he said.
Apparently, he said, the nation hit that number recently, as prices reached a relative level of stabilization. A Dec. 17 report from Re/Max, for example, said sale prices dropped “only” 1.7% from last year in its 54-city survey, which would indicate general price equilibrium.
But before you break into applause, consider that while the banks were waiting for that sign of stability to decide when to put their holdings on the market, they also were foreclosing at a rapid pace.
“In August, the number of houses banks took back was up 49% over the year before, and September was the greatest month in history for repossessions,” Harney said.
That’s bad for individuals, of course, but necessary, in Harney’s view, for the housing market to heal itself.
Then, the robo-signing mortgage-document fiasco unfolded, causing major lenders to put new foreclosures on hold for a while. But as that situation begins to inch toward resolution, banks are resuming foreclosures, which is only putting more pressure on the dam, Harney said.
With the general agreement that the market has hit some long-awaited neutral spot, the banks have their hand on the cork, Harney said. He, among others, expects that cork to come out by the second quarter, as lenders push 3 million or 4 million (as seen by foreclosure-data firm RealtyTrac) to 8 million (as forecast by Morgan Stanley) foreclosed houses onto the market.
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