The speed at which house prices fall over the next few months could depend less on mortgage rates and Americans’ appetite for home buying than on how banks decide to manage the huge number of foreclosed homes they own or may take from delinquent borrowers in the near future.
Unlike home owners, banks often are much quicker to slash prices to unload properties quickly.
The upshot is that, the more homes being sold by lenders, the faster prices tend to fall. That pattern was clear over the past two years: Price declines that began four years ago accelerated rapidly in 2008 as banks dumped foreclosed properties at fire-sale prices. By January 2009, the share of distressed sales had soared to 45% of all sales nationally; it was even higher in hard-hit markets such as Phoenix, according to analysts at Barclays Capital.
[blockquote] banks often are much quicker to slash prices to unload properties quickly [/blockquote]
This is true when there is no other recourse. IMHO, the only reason real estate hasn’t found it’s bottom is because banks are actually holding properties _off_ the market waiting for the Feds to offer bailout incentives that will be better for them. This is a gamble that may bite them if the mood of the nation doesn’t want to hear “too big to fail” one more time. Or perhaps the bankers know something that the man in the street isn’t privvy to.
#1 – You hit the nail on the head. Why sell your inventory for pennies on the dollar if you can come crying to Uncle Sam and get 100 pennies for the dollar-perhaps even more. This boondoggle of a “financial reform” bill protects the mega banks while leaving the community banks to blow in the wind.