Speed Up Foreclosures to Stabilize Housing?

The Federal Reserve and banks need to ramp up foreclosures to expose the shadow inventory that awaits, some real estate industry leaders say. Shadow inventory are homes that have been repossessed or are in the process of being foreclosed upon but have not yet hit the market.

About 2 million homes are expected to account for shadow inventory in the United States, yet that number could be higher — even up to 7 million — if you include loans that are in default.

The top five cities with the highest shadow inventory are Las Vegas, San Diego, Los Angeles, San Francisco, and Phoenix.

Some industry experts say that shadow inventory threatens the stabilization of home prices and is scaring buyers off.

Therefore, they argue that these properties need to get through the system quickly and that foreclosure moratoriums or any delays will only lead to pent-up release and damage home prices more, according to an article in National Mortgage News.

Source: “Why Foreclosures Could Stabilize Housing Market,” National Mortgage News (Jan. 21, 2011)

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