May. 25, 2009 - The End of the Moratorium on Foreclosures

Earlier in the year I wrote a piece about the surprising housing market resurgent’s due to failing prices and great values for first time home buyers.  Then the moratorium on foreclosures which began in January has recently ended.  Between December and March 2009 the number of REO properties on the market dropped by more than 80% from the level while a build up of homes for foreclosure did not move to market.

The attempts to revive and stimulate the housing markets into recovery when homeowners are losing their jobs have failed to solidify current home prices.  Properties are affordable for potential buyers but buyers are becoming scarce.

The build up of REO inventories due to the moratorium will soon flood the market which should further weaken prices.  Banks' are currently selling REO assets at about 50%-75% of what they initially calculated while their expenses to bring these properties to market and manage them are growing. More and more homeowners being evicted are stripping homes to the bone, removing appliances, fixtures, carpet, cabinets, air handlers, motorized garage-door openers and anything else that they can carry off or sell, lowering home values to new lows.

Unemployment increases have diminished the number of potential home buyers and making it more difficult for many to meet current mortgage payments forcing more people to put their homes on the market.  Second homes are also coming onto the market at an alarming rate, as many middle- and upper-class sellers need to raise cash. In some very exclusive private communities in Florida, where home prices are in the seven figures, more than 50% of the homes are on the market.

Unfortunately, the longer it takes to put all of the homeowner recovery plans into place the more difficult of a task becomes.  The end of the unofficial moratorium on foreclosures, combined with rising unemployment, signals that the REO housing market is only just beginning.  The rest of the story is still unfolding.