Foreclosures are not just an immediate problem; the New York Times reports that the number of foreclosed homes now owned by banks and mortgage lenders are likely to depress the housing values for years to come:
All told, [banks and mortgage lenders] own more than 872,000 homes as a result of the groundswell in foreclosures, almost twice as many as when the financial crisis began in 2007, according to RealtyTrac, a real estate data provider. In addition, they are in the process of foreclosing on an additional one million homes and are poised to take possession of several million more in the years ahead.
Five years after the housing market started teetering, economists now worry that the rise in lender-owned homes could create another vicious circle, in which the growing inventory of distressed property further depresses home values and leads to even more distressed sales. With the spring home-selling season under way, real estate prices have been declining across the country in recent months…
Over all, economists project that it would take about three years for lenders to sell their backlog of foreclosed homes. As a result, home values nationally could fall 5 percent by the end of 2011, according to Moody’s, and rise only modestly over the following year. Regions that were hardest hit by the housing collapse and recession could take even longer to recover — dealing yet another blow to a still-struggling economy.
Not good news for those who want to sell a home in the near future. It is interesting that we now hear very little about this at a policy level. There are certainly other important pressing issues in the world (jobs, gas prices, military actions, Republican candidates for President?) but housing values affect a lot of people.
At the same time, I have heard and seen new advertisements from the National Association of Realtors. I wonder why they are running these ads now: are they worried that more people will rent rather than buy? Is there an uptick in the number of people who are trying to combat lower housing values by selling the home on their own? Do they feel that there might soon be changes in public policies, perhaps through measures like limiting or getting rid of the mortgage-interest deduction, that would limit the government’s promotion of homeownership? And interestingly, these advertisements have stressed that homeownership helps create jobs.