Arizona Real Estate Notebook

“The Foreclosure Pain May Drag on for Years”

Well, for the banks the foreclosure pain will last for years for sure.

But not everyone is feeling gloomy. Glenn Boyd, head of U.S. asset-backed securities research at Barclays Capital, recently reduced his estimate of how many foreclosed homes will hit the market based on improvements in the economy. He now believes that the inventory of homes held by banks and other mortgage investors will peak at 900,000 in next year’s second quarter, up from about 678,000 on Aug. 1.

I wonder if Arizona will peak sooner?

Once foreclosures peak, prices can begin the long process of “normalizing,” but then again, have prices ever been “normal”? In addition, price movements that in the past might have caused panic in the streets would now be considered cute.

Henry Fishkind, an Orlando-based housing economist, says some banks tell him they “are holding back [foreclosed-home] inventory” to avoid depressing prices any more than necessary. “It’s in their interest” to avoid flooding the market, and regulators haven’t forced them to do so, he says. That suggests that the backlog of homes headed for foreclosure will be stretched out over several years.