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Yeprem P. Da…, Other/Just Looking in Encino, TX

Do you think banks will flood the market with foreclosures in 2013?

Asked by Yeprem P. Davoodian, M.A., Encino, TX Mon Feb 4, 2013

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Our sources have informed us that most of the so called ''SHADOW INVENTORY'' has been absorbed by large hedge funds that have swooped up the lions share on the condition that they don't flip them for at least 5 years.

Here's a few links you may want to peruse. I personally have a friend who's company is traveling throughout the Country buying up about $500 million in REO's. And that's only one company. There are several.……

"One of the most bullish investors is Carrington Capital Management, which has teamed up with Los Angeles-based OakTree Capital. They have created a $450 million fund to buy foreclosed homes in bulk and rent them out.…

"In a marketing document for one of its funds, Carrington claims that without using leverage or borrowed money it can generate an annual yield of 7 percent from rental income alone. Its long-term strategy is to package the fund into a publicly traded real estate investment trust. If that strategy is successful, Carrington projects investors can see an internal rate of return of 25 percent over three years."…

"Meanwhile, the battle for inventory continues between investors and traditional buyers, and supply shortages could be alleviated if more foreclosures were allowed onto the marketplace, he said. “Most of you are having your inventory stolen out from under you,” he said to the audience of real estate agents and others in the industry."

"Big hedge funds with millions of dollars in cash under their control are gobbling up single-family homes in the capital region with the intention of turning them into rental properties. Or some could be packaged and peddled to real estate investment trusts, who will then sell shares to the public."

This may add a little fuel to the fire. Bottom line? I think the jury's still out. I've also heard that there could be as much as another 5 million new homeowners that are starting to fall behind on their payments this year.

It's like everything else our information Nation is getting from all sectors be it RE, stock market, politics or Obamacare. opinions, interpretation, attitudes and philosophies are all over the charts. I'd just like to see two people in any walk of life agree on the time of day whence standing shoulder to shoulder looking at the same clock.
2 votes Thank Flag Link Tue Feb 5, 2013
The delays on foreclosure process has worked wonders for the Lenders, I don't think they will want to bring back another 2009. We have experienced in South Florida up to 100% (+-) appreciation in some market sections, REO at the top of the list.

Some of the "Big Ones" are truly offering assistance to the Borrowers wishing to modify their loans even on second homes and/or investment properties. Lenders have also implemented better programs to expedite short sales.

REO wave in 2013?
2 votes Thank Flag Link Tue Feb 5, 2013

I believe they will released at a pretty steady rate, not to flood the market and lower home values. I also believe the will be auctioned off to investor for rehabs. Investors along with 1st time home buyers makes up 80% or our market.
1 vote Thank Flag Link Tue Feb 5, 2013
Most of the REO listings of a few years ago have dried up as the banks have moved away from retail disposition of the assets to selling in bulk to hedge funds and other investors. Best move for value oriented owner occupant buyers these days is to focus on short sales which seem more likely to be approved today than they were previously.
0 votes Thank Flag Link Wed Feb 20, 2013
I do not know. Currently, there is a small supply of listed properties. Areas with small amounts of short sales and foreclosures are seeing a stabilizing housing market. Some of these areas are seeing a slight appreciation. If bank floods the market with foreclosures it would freeze or decrease current housing prices. The banks have a plan that is profitable for them. What they are planning to do with their large inventory of foreclosures I cannot tell you. Banks may release a small, modest or large amounts of forclosures. For the current housing market it would be best if forclosures are released modestly. Then again they are the drivers and have a master business plan.
0 votes Thank Flag Link Mon Feb 18, 2013
The banks are in much better financial positions now. They're seeing their distressed deals actually starting to turn a profit. So, they'll hold on to what they have left and slowly release their holdings over the next few years.
Web Reference:
0 votes Thank Flag Link Fri Feb 15, 2013
Yes and it will be location dependent - they will flood areas where growth is occurring and stall areas where prices are still depressed - they tend to gain more in growth areas obviously and check their balance sheets - depressed markets will be a slower flood.
0 votes Thank Flag Link Fri Feb 8, 2013
Extremely unlikely. The banks are not interested in flooding the market because it would damage their assets.
0 votes Thank Flag Link Fri Feb 8, 2013
I keep hearing that they will, but I've personally been hearing that for years. We'll see!
0 votes Thank Flag Link Fri Feb 8, 2013
I think there will be a wave of foreclosures released at some point this year, and home owners are waiting to list. wrong answer read blog for more.…
0 votes Thank Flag Link Fri Feb 8, 2013
I am of the opinion that they will not flood the market because it could upset a fine balance. I know in the Nashville area we have a short supply of foreclosures but it seems like we have a significant amount of short sales.
0 votes Thank Flag Link Fri Feb 8, 2013
No. I think they will continue what they're doing now: selling in bulk, huge packages of non performing real estate to uber wealthy hedge funds, REITS and other like interests. It costs the banks less to sell like this and they are getting rid of multiple headaches at once.

Scott Miller
Realty Associates
Boca Raton-Miami Beach, FL
0 votes Thank Flag Link Thu Feb 7, 2013
What does this administration have to do with the price of tea in China? Am I missing something?
0 votes Thank Flag Link Thu Feb 7, 2013
Don't waste your time it isn't happening. Not at least under this current administration.
0 votes Thank Flag Link Thu Feb 7, 2013
Thank you all for the great responses. I posted this in order for us to get opinions and to better understand the market, locally and nationally. Again, thank you all for the responses.
0 votes Thank Flag Link Wed Feb 6, 2013
I really get a kick out of some of these threads. It's like watching politicians or financial gurus in action. They all have their own opinions and philosophies and at the end of the day you still walk away scratching your head trying to figure out who to pay credence to.
0 votes Thank Flag Link Wed Feb 6, 2013
No I do not believe in the "Shadow Inventory" legend. We might have property come back on the market that was sold for low prices and bought by investors, but that will be down the road.
0 votes Thank Flag Link Wed Feb 6, 2013
Akil is right, there are so many issues regarding foreclosures. If there was a glut of REOs it would certainly change the value of certain areas. Ivestors are out there on the court house steps waitting to puy and flip
0 votes Thank Flag Link Tue Feb 5, 2013
I don't believe there will be a flood of REO properties in 2013. And even if banks do release some properties for sale they will be bough very quickly as market is pretty dry right now.
0 votes Thank Flag Link Tue Feb 5, 2013
So many of us are pondering this question. I for one do not think they will "flood" the market with REO homes. We may see more coming, but a "fllod" of them???? I think not.

Kawain Payne, Realtor
0 votes Thank Flag Link Tue Feb 5, 2013
Still believe this will keep trickling for several more years as the impact of a large dissolvement would have a very adverse affect.
0 votes Thank Flag Link Tue Feb 5, 2013
No, they would be shooting themselves in the foot. their current strategy of holding back has been very effective in raising prices and diminishing their losses.
0 votes Thank Flag Link Tue Feb 5, 2013
Banks are unspeculative lets see what happens ..HENA MARTIN BROKER
0 votes Thank Flag Link Tue Feb 5, 2013
Your asking an opinion then no I dont think we'll see those "ghost" properties that people have been talking about in 2013.
This is a great time to buy based on interest rates and lower prices and with a demand for inventory some listings are getting multiple offers.
0 votes Thank Flag Link Tue Feb 5, 2013
I doubt they will 'flood' the market. They have been waiting, I think, for conditions to improve to minimize their losses. If they flood the market prices will fall again and rather quickly and they would be working against their own best interests. I am sure they will release these properties, but probably in a slow but steady stream.
0 votes Thank Flag Link Tue Feb 5, 2013
Honestly, our research is showing that there will definitely be a release of properties by the banks. The question is really how many properties? We are watching on standby to see how it will play out.
0 votes Thank Flag Link Mon Feb 4, 2013
Thank you Christopher.
Flag Wed Feb 6, 2013
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