Will There Ever Be a ‘Tidal Wave’ of REO Listings?

Today’s Outlook column looks at how bank-owned foreclosures and other involuntary home sales will govern the pace of home price declines over the coming months.

Banks and other companies that sell REO, or real-estate owned, properties are typically faster to reduce prices than traditional sellers, so they tend to speed along any price correction. That’s why it’s a good idea to keep an eye on the share of distressed sales—including foreclosures and short sales, where banks approve a sale for less than the amount owed.

While that share is rising—Barclays estimates that it jumped to 30% of all sales in July, from 22% in June—there’s nothing to suggest, at this point, that a tidal wave of foreclosures will hit the market.

The reason: banks are taking greater steps to avoid foreclosures, including loan modifications and short sales, where a home sells for less than the amount owed.

Click Here to Read: Will There Ever Be a ‘Tidal Wave’ of REO Listings?...