I know you have heard it before.  But this time it is a must.  The REO's are coming.  I just spoke with a top exec. at B of A, and they are drowning.  We have been told twice this year that the REO's will be dumped onto the market, and twice we have had moratoriums, keeping them under wraps. 

One of the reasons was because the government wanted to see if the loan modifications would work, which they did not.  A lot of the homeowners who did loan mods are back into default.  So, in order to fix this problem, the banks need to unload their assets and deal with the consequences. 

The number is not clear, but it is around 90,000 reo's in california alone that the banks are holding onto, and trying to keep under wraps.  But come September of 2009, the moratorium is over and we will be flodded. 

What this means is the market price will take another dive, one more time.  Supply and demand will bring the prices down and a huge rate.  Then, after a few years, we will recover and slowly climb our way back up. 

Not only is this troubling to hear for most homeowners, but here is more potentially bad news.  This exec. mentioned that it would not be out of the question for the interest rates to rise into double digits.  If you think about it, that could be very harmful.  We would have a large supply of bank owned properties, short sales and a few regular sales, and no buyers buying them because the rates are so high, no one can afford the payment. 

Time will tell.  We are not out of the woods yet.