Real estate experts are warning that another significant spike in foreclosures could hit the housing market in the coming months.
They cited another round of adjustable-rate mortgages resetting to higher interest rates and a “shadow inventory” of bank-possessed foreclosures as elements that may potentially damage the market.
There is a glut of bank-owned properties that haven’t moved onto the market, according to Rick Sharga, vice president of marketing for Realtytrac.com. He said it was unlikely banks would put them up for sale all at the same time because such a move would “devastate the market.”
Realtytrac compared records of bank-owned properties in its database with those listed on the real estate search site mls.com in several states, including California and Maryland, said spokesman Daren Blomquist. The company projected that about 70 percent of bank-owned properties have not been listed for sale nationally.
“[Banks are] just so overwhelmed — they haven’t put [them] on the market yet,” he said.
Also of concern the second round of adjustable-rate-mortgages that “will make subprime loans look like a walk in the park,” Sharga said. The mortgages are likely to be defaulted on when the rates do reset higher, though the country is not likely to see as many defaults as it did during the subprime crisis because homeowners are more prepared now, Sharga said.
The Washington area, though, has recently bucked the nationwide increase in foreclosures.
“My feeling is we’ve probably gotten through the worst of it,” said Donna Evers, president of local firm Evers & Co. Real Estate, citing the decline of housing inventory from an eight-month supply in December to a 4.2-month supply, and a three-month supply in Fairfax County.
She was skeptical about the “shadow inventory,” though, saying it would take too much cooperation on the banks’ part for them to
coordinate such a move, and that banks typically try to get rid of foreclosed-on properties as quickly as possible.
Blomquist said the Washington area still has foreclosure “hot spots,” such as Prince William County. Because of Prince William’s “extreme foreclosure rate,” though, prices have dropped faster than the rest of the area and it’s moving more quickly toward recovering, he said.
Still, Dave Webb, principal of the real estate auction company Hudson & Marshall, said there wouldn’t be another increase in the supply of houses until the third quarter, and there would be many more foreclosed homes for sale in the fall.
