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Real estate agents and everyone else connected with the housing industry are shaking in their boots.

Will a shadow inventory of low cost homes flood the market?

• Many foreclosures have not hit the market but are in lender’s inventories throughout the county.
• Many modified loans won’t make it past the trial period and will foreclose, while others will default again – as has been the case of 51% of loans modified in early 2009.
• More homes will foreclose when their adjustable rate mortgages reset this year, sometimes doubling house payments.
• Homeowners with negative equity may fall into foreclosure or may chose to strategically default.
• Many investors who bought foreclosure bargains to flip them may put them on the market rather than renting them out.

If these hit the market all at once, the results could be disastrous.  Housing values that have crept up in DC and throughout the country could be quickly undercut.  However, not all is lost.

There are potential reasons why this may not happen if all parties involved in foreclosures act just a little differently.

• Banks could offer meaningful modifications that would keep people out of foreclosure.  Some homeowners in over heads might still lose their homes, but the numbers would be way down.  The latest modification in Making Homes Affordable announced on March 26 might facilitate principal reductions for some.
• If new programs designed to bring underwater-homeowners back to shore are effective, people may have fewer reasons to walk away from their homes by choice or by circumstances.
• Investors might see the wisdom of renting out their properties, especially if they paid cash, in an economy where loans are harder to obtain.
• In the best of circumstances any or all of these factors will lessen the amount of shadow inventory on the market, which will allow continued improvement of the housing market.

Regardless of what’s lurking in the shadows of the housing market, Express Realty Services can help you find an affordable home in DC, Maryland, or Virginia.  Contact us today!