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Report: Foreclosures over three years away from relief

November 4, 2010 - It will take quite a while for the country to generate enough moving activity to eliminate the current shadow inventory of foreclosures - more than three years by one estimate.

The latest predictions from Fitch Ratings tab the nation's shadow inventory - delinquent mortgages and foreclosed homes that banks have repossessed but have not yet fed into the market - at 7 million homes. At the current pace of sales, it would take at least 40 months for the country to clear that supply, and the issue is being exacerbated by foreclosure halts from some of the nation's major banks.

These are maneuvers that some banks have taken to stop foreclosure sales while they work to perform internal reviews of their documentation procedures - all at the behest of government officials who say there's a risk some of the forecloses were performed improperly. The longer these reviews take, the larger the shadow inventory grows, putting more pressure on home prices.

The issue could be relieved quicker if more first-time buyers were moving into homes, but reports say that these buyers have pulled back their moving plans somewhat in light of issues obtaining mortgages or finding distressed properties to buy. Analysts told the Charlotte Observer in North Carolina that October home sales will likely fall because of reduced moving activity caused by the foreclosure halts.
 

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