Banks Stacking Up More and More Real Estate Holdings: "Shadow Housing" Grows Across the Country

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Yesterday, the Wall Street Journal covered the reality of banks collecting more and more real estate on their books, describing the situation as a "shadow housing" market in an article written by Dawn Wotapka and entitled, "Shadow Housing Inventory - Going Nowhere Fast."

According to the WSJ, financial institutions that are supposed to be in the money business are holding lots of homes on their books and look to be holding lots more before this bad economy bottoms out. Experts are predicting that this "Shadow Housing Inventory" will depress real estate sales prices even more (prices will go down as the banks try to move them off their books) and this won't be good for a fast economic recovery.

Back in January, we discussed predictions on how big the Shadow Housing Inventory may get. Then, experts were pondering as many as 6,000,000 homes being owned by banks by 2013. The WSJ article suggests that number may be too low.

One additional factor brought out by the article: underwater mortgages (where the homeowner owes more on the mortgage than the house is now worth) will result in more defaults in the coming year or two - and there are lots of these out there, so the Shadow Housing Inventory may get bigger before it gets smaller.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Rosa Eckstein Schechter, Eckstein Schechter Law | Attorney Advertising

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