Hello from Las Vegas! There has been considerable speculation as to what we can expect in the way of foreclosure inventories over the next several months or year. A close look at some of the bank filings and how quickly they are processed can give some helpful insight.
The details are below, but the short answer is that I do not think it possible that any great glut of foreclosures will be hitting this market anytime soon. Even if there were a huge spike in Notice of Defaults (which I do not think will happen) this is unlikely to affect foreclosure inventories in the short or midterm.
Notices of Defaults, the first step in the foreclosure process, have risen somewhat over the last year from 883 in March 2012 to 1,488 in March 2013. Only a fraction of these, historically, result in either returning to the bank for resale or are sold to a 3rd party at an actual Trustee Sale. In March this year, a total of 424 properties went back to the bank or were sold to 3rd parties at Trustee Sales. Most of the 3rd party sales were to companies or individuals that intend not to occupy but to re-sell. The public records show that over the last 12 months between 400 and 600 homes per month, as a result of foreclosure, have come on the market.
Time to Foreclose—The average number of days between the filing of the Notice of Default and the final sale at auction averages, as of March this year, 317 days. That is a drop of around 100 days from 12 months ago, so banks are accelerating this process somewhat.
After the bank or 3rd party has the home there is a considerable lag time between possession and the eventual resale. Banks, again as of March, are taking an average of 215 days after taking possession to resell. 3rd parties are doing somewhat better with an average of 168 days. The median days on the market for foreclosure sales over the last month were 39.
All this is getting down into the weeds somewhat, but for actual foreclosures, from the start of the process to a property actually coming on the market is as of today, 493 days, on average. That is a long time. This could shorten if the banks become more aggressive, but even if they do, what are the possibilities that for the rest of this year we will see a real glut of foreclosures hit this marketplace? I say that the possibilities are slim to none. There will likely be more but this is a hot market right now and can, in my opinion, easily absorb these additional homes.
That’s it for now! Please let me know if you have any questions.
