The number of homes about to be foreclosed on has created a "shadow inventory" of homes that will be for sale in the coming years and will weigh down prices. 1.7 million homes were on the verge of foreclosure in the fall, up from 1.1 million at the same time last year.
The foreclosure backlog is already nearly half the 3.8 million unsold new and existing homes. "We're going to be dealing with high levels of distressed (sales) in the marketplace for at least a couple of years," said Mark Fleming, chief economist of First American CoreLogic. "It's not just all going to disappear."
First American assumes that fewer delinquent borrowers - about one-third - will end up losing their homes, and that nearly 30 percent of bank-owned properties have already been listed for sale. In many markets, the number of delinquencies has decreased in recent months due to more homeowners being reviewed for loan modification programs.
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