Why there are more foreclosures on the way

In many parts of the country, the current lack of housing inventory has create multiple-bid situations for many buyers.  The shortage of inventory won’t last long, though.

There are a few simple pieces to the puzzle.

First, the big banks put a moratorium on new foreclosure filings toward the end of 2008.  Since it takes a few months to get from filing the notice of default (NOD) to a foreclosure sale, you can see the impact of November and December 2008 on today’s market.

Secondly, the number of NODs filed in January 2009 was at a higher level than we have ever seen.

Lastly, over half of the loan modification consumers are back in default after six months.  Some people simply don’t have the financial capacity to own real estate.

The good news is mortgage interest rates are extremely low and there is a new tax credit for first-time buyers who buy real estate before December 31, 2009.  Those two factors make the state of the market largely irrelevant.  We know it is a great time to buy real estate today.  Although prices could continue to decline, we won’t know the bottom until it starts to climb again.

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