The increasing numbers of foreclosed properties coming on the market is having an effect that extends beyond simply competing with 'normal' resale properties. We can all see the direct effect as the prices these properties are getting are undercutting the market value of non-distressed properties.
The most insidious and damaging effect is on the marginal properties on the market; the 'short sale' the last ditch effort to get out from under an In-bearable mortgage. Most short sellers will be over optimistic when pricing, do not get sold, chase price and still do not sell. Add to this the increasing number of foreclosed properties and you get short sales becoming foreclosures. By some accounts up to 45% of the short sale properties become foreclosed properties.
Which adds to the supply...
(Blackholes draw everything near into itself and by doing so grows stronger allowing it to draw matter that is farther and farther away, and grows.)
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