FAIR USE NOTICE

FAIR USE NOTICE

A BEAR MARKET ECONOMICS BLOG


This site may contain copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in an effort to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. we believe this constitutes a ‘fair use’ of any such copyrighted material as provided for in section 107 of the US Copyright Law.

In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml

If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.

FAIR USE NOTICE FAIR USE NOTICE: This page may contain copyrighted material the use of which has not been specifically authorized by the copyright owner. This website distributes this material without profit to those who have expressed a prior interest in receiving the included information for scientific, research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107.

Read more at: http://www.etupdates.com/fair-use-notice/#.UpzWQRL3l5M | ET. Updates
FAIR USE NOTICE FAIR USE NOTICE: This page may contain copyrighted material the use of which has not been specifically authorized by the copyright owner. This website distributes this material without profit to those who have expressed a prior interest in receiving the included information for scientific, research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107.

Read more at: http://www.etupdates.com/fair-use-notice/#.UpzWQRL3l5M | ET. Updates

All Blogs licensed under Creative Commons Attribution 3.0

Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 Unported License.

Thursday, April 14, 2011

Here's What Foreclosure-Gate Will Really Do to House Prices




Henry Blodget

Henry Blodget

Posted: October 13, 2010 01:45 PM

Here's What Foreclosure-Gate Will Really Do to House Prices




Thanks to revelations that they have been fabricating the documentation necessary to foreclose on some houses, the country's big banks have suspended foreclosures.

This gives us all an excuse to scream about the outrageousness of the bailed-out banks again. It also means that some folks will be able to spend a few more weeks or months in their houses.

But what does it mean for the housing market? And the banks?

For those who are praying for higher (or at least stable) house prices in the near-term, foreclosure-gate is good news: By stopping the flood of foreclosures onto the market, foreclosure-gate will reduce inventory-for-sale, which will likely act as a temporary positive for house prices. So homeowners may get one more temporary gift at the expense of house buyers.

Of course, when the foreclosure-gate moratorium ends, which it inevitably will, a sudden flood of foreclosures will hit the market, as the banks try to make up for lost time. And when that happens, prices will likely temporarily plunge. So sell while you can.

And what about the banks? What will happen to them now that they've stopped foreclosures?

Well, the banks will spend another few weeks or months eating the non-interest payments of folks they might otherwise have foreclosed on. Over time, if the foreclosure blockage remains in place, the number of non-payers will increase. Eventually, moreover, when the foreclosure block ends, the banks will likely suddenly have to play catch-up here, too, which will mean big write-offs and loan losses.

Overall, as bank analyst Chris Whalen recently observed, banks are quietly moving into the "non-operating REIT business"--owning a lot more real estate than they ever intended to. As anyone who has been stuck with an underwater investment property can attest, the carrying costs of holding distressed real-estate are significant. And Whalen believes that this will soon begin to eat into banks' profit margins. It will also continue to represent a huge "shadow inventory" that will keep the pressure on housing prices for years.

Now check out Chris Whalen's terrifying presentation on what this will do to banks

Follow Henry Blodget on Twitter: www.twitter.com/hblodget

No comments:

Post a Comment