The inventory glut is growing.
According to numbers released today by RealtyTrac, the number of properties repossessed by banks (real estate owned or REOs) skyrocketed to 77,295, which is a 184 percent leap compared to the same period last year. "The sharp rise in REOs, combined with slow sales, has resulted in a bloated inventory of bank-owned properties for sale," said RealtyTrac CEO James J. Saccacio, whose company is based in Irvine, Calif.
Overall foreclosure numbers rose as well, with more than 272,000 properties receiving foreclosure filings in July. While that represents a 55 percent jump year-over-year, it mercifully qualifies as a relatively small—8 percent—increase from June's numbers.
But that doesn't mean the foreclosure crisis is beginning to abate, according to a story published Monday in the Wall Street Journal. It predicted that any slip in the foreclosure numbers would be a reflection of new state and local efforts to temporarily halt foreclosures in their localities.
Members of Congress are also urging lenders to take a break from filing foreclosure notices.
U.S. Rep. Barney Frank (D-Mass.), one of the architects of the recently passed housing rescue bill, along with other members of the House Financial Services Committee, have asked lenders to review their own records for borrowers who may be eligible to refinance their loan through the Federal Housing Administration starting Oct. 1.
As usual, states such as California, Nevada, Florida, and Arizona lead the country in terms of the number and rate of foreclosures within their respective borders. Bank repossessions also soared 427 percent year-over-year in California, which reported more than 23,000 REOs in July.
It adds up to a serious inventory problem for builders, who must compete against a growing number of bank-owned properties with increasingly low prices. "Banks and investors have grown more leery of the rising costs of holding onto vacant homes," the Wall Street Journal said in a story published Wednesday. "Along with such expenses as insurance, lawn care, and maintenance, banks are being hit with higher costs for complying with local regulations applying to vacant homes. The price cutting may mean even deeper losses for banks, but in some areas price tags have fallen enough to entice bargain hunters back into the market.”"
Unfortunately for builders, such buyers will find a wealth of choices when they re-enter the housing market: new homes, bank-owned foreclosures, and for-sale listings of existing homes. Inventory of existing homes hit 4.49 million in June, which translated into roughly 11.1 months of supply at the current rates.
Alison Rice is senior editor, online, at BUILDER magazine.
Learn more about markets featured in this article: Los Angeles, CA.