The number of foreclosures last month in Oregon fell below 1000 for the first time since February 2008 according to ForeclosureRadar. The number of properties sold back to the bank were down 34.7%, while properties sold to third-party investors fell 17.8% from June. This drop in foreclosures doesn’t appear to be because there are fewer homes in default but because of a conscious decision by banks to put foreclosed homes on the market more slowly. This strategy has two benefits for banks. Fewer foreclosed homes for sale puts less downward pressure on prices meaning banks will make more money on each sale. It also allows banks to postpone booking their losses on these homes. Spreading their losses over a longer period of time improves banks’ apparent financial health to investors and regulators. The longer they postpone defaulting on a loan, the longer they can maintain it on their books at above-market value. In banking circles this is referred to “extend and pretend.”
There is another factor affecting foreclosures nationally, legal challenges by homeowners. In some states bank repossessions has been all but shut down by homeowners who are disputing the practice of “robo-signing” in which lenders process large numbers of foreclosure filings with little or no formal review. Homeowners are also challenging, and halting, foreclosures by questioning transactions where the paper trail by banks is so poor that there is no longer a clear title to a property.
So what does all of this mean for buyers and sellers? On a national level, it likely means that the real estate market will be fairly flat for the next few years. Lenders currently have 850,000 foreclosed homes on their books with another 1.1 million in the early stages of foreclosure. Some experts estimate there will be an additional three million homes facing foreclosure before this mess is over. Locally things may not be so bleak. At least one market index expects home values in Bend to appreciate 11% annually over the next five years. Whether or not we actually see 11% a year remains to be seen but this is definitely a buyer’s market with prices and interest rates as low as they are. Have you thought about buying a home in Bend? Take a peek at Bend homes for sale in your price range.
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