It will take at least another year to work through the glut of REO inventory in the market and yet to come to market, according to Rick Sharga, senior vice president of RealtyTrac.
Speaking at HousingWire’s 2011 REO Expo in Fort Worth, Texas, Sharga said the housing market is years away from full recovery, and he expects 2012 and 2013 to look similar to this year as the industry grapples with levels of distressed properties never seen before.
“It’s taking so long to get out of this mess because it took us so long to get into this mess,” Sharga said. “We were at the tail end of an unusually long boom time in housing. Unfortunately, we’re anything but recovered, we’re actually still searching for the bottom.”
He said all previous housing busts were precipitated by an economic downtown followed by rising unemployment followed by increased foreclosure activity. Yet in 2006, none of these predictors were in place, according to Sharga.
“Unsustainably high home prices, exacerbated by what we can only euphemistically call ‘really, really interesting lending practices,’ ” led to much of the bubble and subsequent bust, he said.
In 2010, there were 2.9 million foreclosure filings, which was the most ever, and more than 1 million REO sold for the first time ever. In March 2010, there were 376,000 foreclosure filings, while there 550,000 in all of 2005.
“Volume is just off the charts,” Sharga said. “Yet after the robo-signing scandal of last October, there’s lots of foreclosed properties just sitting there. We’ve heard from clients that they’ve got thousands and thousands of foreclosure actions backed up because they’ve been told to hold off.”
He said 80% of 1.1 million properties in foreclosure and 75% of 900,000 REO aren’t yet listed for sale.