Will More Real Estate Inventory Hit the Street After the Elections?

[Corey Dutton]

Despite reports that several of the large banks will be releasing a new wave of inventory, we all wonder what is really happening behind the scenes. Our most active real estate investors have been sending fewer and fewer properties to us for real estate financing as the months go by. Some of them speculate by saying no large amount of new inventory will hit the streets until AFTER the elections.

What is your thought on this? With so many properties in varying stages of pre-foreclosure and foreclosure, there’s definitely inventory out there waiting in the wings. Personally I think it will continue to trickle out and not be “dumped” after the Elections. If you have an opinion on this topic, please share.

[Jeff S.]

I’ve not seen a shred of evidence that the banks will release a new wave of inventory after the election but I’d love to read about it. What is your source for this, Corey Dutton?

The banking sector has been immensely profitable and any losses they've incurred from housing have been more than made up by their investment banking side. All reports I've seen still indicate they still hold upwards of 2.5 to 3 million homes as REO's. From their behavior, it's been pretty clear that they are willing to hold these for a long time.

From a few of their own statements, some of the big REO agents in my area, who used to represent hundreds of REO's a month now have as few as five. It appears the banks have turned their focus to short sales, which they seem to now be encouraging and which I suppose minimize their losses over straight REO sales. In fact, reports abound that they are paying upward of $30,000 to the homeowners to encourage these sales. Plus, at least in some areas, prices seem to have stabilized – of course this is through extreme market manipulation by the very banks that hold the inventory.

From a public relations viewpoint, it also seems that they’ve slowed down on actual foreclosures. Public policies, such as the “Homeowners Bill of Rights Act,” here on the left coast, are also restricting them. Can you imagine the public cry if the banks were held responsible for crashing the market by a huge release of supply?

It’s wishful thinking for me to think that the election provides some sort of gate for the banks to change their recent habits. I know most investors want it to happen, but I really see no reason. Of course, I’d like to read your source, Corey.

Jeff