What does this mean for homeowners? In short, we may be in real danger of further depressed home prices in the not too distant future, and continuing into the foreseeable future. Until the job market improves substantially, bringing the unemployment numbers back down, homeowners will continue to have difficult paying their mortgage every month, and will risk having to sell their homes "short", or worse, will be facing foreclosure. Both of these situations saturate the market with inventory, and put downward pressure on home prices across the chart.
Banks currently have a store of foreclosed homes that are not actively listed on the real estate market, called "shadow inventory". Often banks try to strategically release their inventory as to avoid driving down their own prices by creating a surplus of homes on the market. Its unclear how many homes are in this shadow inventory, but it numbers in the tens of thousands, if not hundreds of thousands in the Chicago market. The 1 in 5 delinquent loans referenced above would represent another 200,000+ homes at risk of adding to this supply.
I noted yesterday on our Facebook Page - Finnproperty - that foreclosure activity has already begun to pick up. If you're a homeowner considering selling your home in the next couple years, do not wait until prices have been further depreciated. Sell your home now, before prices take another dip, and while interest rates are still incredibly appealing to buyers!
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