If you stop paying your mortgage, chances are, you’ve got nearly two years before you’re forced to find other lodgings. With an average of 631 days in limbo, the “shadow inventory” has reached new heights:
Increasingly in some states, foreclosure is like a Roach Motel: Houses come in, but they don’t get out. This has led to an egregious statistic in the new issue of Mortgage Monitor, a report from data-tracker LPS Applied Analytics, which shows that the average loan in foreclosure has been delinquent for 631 days. That’s nearly 21 months, a new record.
Much of the lag has to do with the processing of foreclosures. Since the “robo-signing” scandal — where financial institutions were accused of moving foreclosures along without taking the time to properly read and process the paperwork — lenders have been carefully dotting every “i” and crossing every “t.” This has slowed the timeline of moving a home through its repossession and into resale to a new owner.
What does this mean for home prices?
In very hard-hit states, that pool of foreclosed-but-not-yet-on-the-market houses is a real hazard, keeping property prices depressed. Florida, for example, has gotten slammed in the foreclosure crisis. LPS shows that a whopping 22.8% of loans there — nearly one out of four — are not being kept current. Of those, 8.4% are delinquent and 14.4% are actually in foreclosure.
Prices for the big Florida metro areas reflect the problem: In Tampa, for instance, prices were down in October by 6.7% from the year before, while in Miami, they were down 4.0% from the previous year.
Different areas are faring differently, depending on the median home price, the local economy, and how the state handles foreclosures. There are some reasonable deals, but not all foreclosures are bargains. As always, “Let’s be careful out there”.