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More Foreclosures Hang in the Balance

For the first time since 2007 the home values seem to be stabilizing. According to statistics on zillow.com’s home value index the value of homes in the United States has only fallen 0.4% in the moth of April 2010, and down 1.1% for the quarter. This is an improvement from previous months. Could we be nearing the bottom or is there yet another bottom to fall from the housing market?

If you ask attorneys handling foreclosures you might get some shocking evidence that more foreclosures loom in the distance. Many families facing foreclosure have turned to the legal system to delay losing their homes, and to buy them the time to come up with the money to keep their homes. Banks are now having to show proof that they in fact hold the right to foreclose on a particular property, causing them to have to dig for documentation and present it to the courts. It is a stall method commonly used to buy families time to prevent foreclosure and renegotiate better loan terms.

While some families will come out on top and keep their homes. looking at the statistics a good majority of them will still find themselves in foreclosure. I turned to the Bureau of Labor Statistics. Unemployment in the last month has edged downward by roughly 287,000, but our current unemployment rate is still more than double what it was this time in 2006. This supports that although some families are fighting for their homes, many are still unemployed, and when the legal issues are ironed out, will still be left in foreclosure.

Banks are facing large amounts of foreclosure, and to make things easier they are allowing those in foreclosure to remain in the homes longer in hopes they can come up with the money or negotiate new terms. This also lessens the banks burden of upkeep on a home if it goes into foreclosure. With someone living in the home the air conditioning is most likely on preventing mold issues, the yard is being taken care of, decreases the likelihood of vandalism etc.

All of this combined could be what is behind the slow down in dropping home values. It is leading some to believe that we are nearing a bottom in the current housing market. I have to disagree.

With people fighting for their homes longer, and banks not foreclosing as rapidly to clear current foreclosures, it is creating a backlog. If you slow down the rate of foreclosure, you in turn slow the decline in property values for a time… until the backlogged foreclosures go through and we head to a new bottom.

There are still many foreclosures out there. Once these foreclosures hit the market, and are sold at bargain prices, we will again be faced with the possibility of sharply declining home values.


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