Bank of America just became the first bank to suspend foreclosure sales across all 50 states. This follows news that JP Morgan Chase and GMAC would self impose eviction moratoriums and REO sales in 23 states. The next step is a nationwide freeze on foreclosure sales and new evictions by all servicers.
These legal actions only serve to further delay the inevitable. Ultimately these foreclosed properties will hit the market some six to
twelve months from now and further add to the inventory of unsold homes on the market. Our sluggish economy is in no shape to absorb a sudden flood of
foreclosed properties. Delaying the disposition of REO inventory slows
the home price recovery process.
This makes it painfully obvious that these proceedings represent the proverbial nail
in the coffin to insure further housing price declines. We probably
won’t see much in the way of a decline this quarter but I am willing to
bet that in the next three quarters we will experience negative results.
Until these issues are resolved, the
housing industry will continue to limp along at a snail's
pace, suffering from an overhang of shadow inventory and the looming
threat of a downward spiral in home prices.