The "second wave"

Some of my first time home buyers have voiced concern over a potential future drop in prices, due to a looming "second wave" of foreclosure properties that could be dumped on the market by banks.

My impression has been that the banks in our market have been selling in a measured manner, and while they do have a growing inventory of property on their balance sheets, they aren't inclined to dump them all at once, causing prices to fall. Meanwhile, investors have been gobbling up foreclosed and distressed properties, often buying with all cash. In our area, there is a balance between the supply and demand for the foreclosures.

But what about nationwide? Barclays Research has studied and quantified this inventory. They note that bank owned foreclosures peaked in late 2008 at 845,000. By December of 2009, that number shrank to 617,286. Nationwide, banks are adding foreclosures to their inventory now as loan modifications and other programs have failed. Barclays projects the "second wave" will hit 733,000 next month, but will decline through the end of the year.


Source:
http://online.wsj.com/article/SB10001424052748703523204575129861685086570.html?mod=WSJ_Real+Estate_LeftTopNews