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The Impact of Foreclosures on Home Prices

Richmond Virginia Foreclosures VAThe never-ending foreclosure crisis is adding to the fear that home prices will fall further. There are about 4 million loans in foreclosure, or at lease 3 months late, according to the analysts at Barclay’s Capital.

How quickly foreclosed homes come into the market and their price will dictate how fast the housing market recovers. Programs, run by the government, to grow stock sales and decrease foreclosures have worked to stabilize the market earlier in the year. Sadly, now that many programs have ended, the back-inventory is a major downer for home prices.

Its been reported that banks have been holding back some inventory and not releasing properties at auction. Could be that they see a turnaround in our immediate future and want to hold out for higher prices. These actions are a far cry from the fire sale prices banks were selling in 2008 and 2009.

Dean Baker, co-director of Center for Economic and Policy Research, argues that house prices will decline further. Instead of a government-controlled slow decline, he argues market principles should control how far prices fall.

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