Rise in Foreclosure Inventory?

The numbers of homes for sale, commonly referred to as inventory has shown a resurgence with 24.3% more homes for sale over 2009 levels. This is after a year-over-year decline in inventory for the past four years.

BLUF (bottom-line up-front):
No, banks say they are NOT holding inventory back from the market.

Bank-involved sales (Real-estate owned or "foreclosure" homes) has seen a precipitous decline over 2009 levels with 34.4% fewer bank-owned homes for sale compared with 2009 levels. This is compared with a 62.3% rise from 2008 to 2009!

Many have speculated that there is a shadow inventory of bank-owned homes that is "being held back" from the market to control inventory and keep prices higher. At a 3/11/2010 meeting hosted by Wells Fargo corporate, the Wells Fargo mortgage executives said their carrying costs (inventory maintenance) would preclude a lender from holding inventory back from the market as would their investors who actually hold some of the notes.

A 3/19/2010 Wall Street Journal article estimates that bank inventory was up 4.6% in January (645,800) from December but had peaked in November at 845,000 homes. The article also stated that people behind on their mortgages is up but that it is taking considerable time for the banks to sort out who is eligible for loan modifications.

It is predicted that foreclosure inventory will continue to rise and will peak at 733,000 this month before falling again. Nation-wide, foreclosure sales make up 20% of the homes sold and according to the Mpls Association of Realtors, Twin City real estate sales were 37% of the total sales in February (1759 out of 4765 pended and closed sales).

With 1st time home-buyers and investors buying the foreclosure inventory as quick as it hits the market, this writer expects bank-owned inventory to remain low for the rest of the year.