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Foreclosure Rates Expected to Rise -- Is That a Good Thing?

foreclosures to rise in 2012The entire US is lamenting that there are a lot of houses which are vacant right now and the sad reality is that not enough people want to buy them. 

The foreclosures that created such a problem the past few years are expected to rise one more time. The foreclosure rate is predicted by such eminent financial review journalists as those from the Wall Street Journal and the Washington Post.

According to Suzy Khimm, "the expectation is that some of these new defaults may be necessary medicine for the housing market to recover in the long term: They represent homes that have been backlogged in the courts and elsewhere that can't be sold until they finish going through legal foreclosure proceedings".

The way it breaks down is this--in the past year, due to issues in delaying the bank foreclosures, a wide range of homes did not go on the market. There was a crack-down on practices that were illegal, unethical and abusive. In addition to this, a very backlogged course in several states such as Florida and Maryland slowed the bank foreclosures process even further, essentially grinding the whole thing to a hald.

Nearly a million houses have started the foreclosure process, but not yet completed it. This is known as shadow inventory and it isn't really counted anywhere. The very recent reported drops in housing--at least according to capital Economics, a research firm that is based in England, are not because there has been a vast improvement in the demand, but instead because about half the housing that is available is lost in transit in the shadow area.

That explains a lot about why the drop in housing for sale exists. It's not because more people are buying, but rather because less houses are showing on the rolls. Those foreclosures are about to pick up again and you'll see another half a million houses moving into the inventory able to be purchased. Some economists are warning that the banks should not move too rapidly to attempt to clear away the pending houses until they have some more clear ideas about who may be willing to buy them.

With so many houses on the market, experts believe that banks will move rapidly to try to broaden their lending standards rather than to keep them so tightly under control and buyers who are not currently seen as creditworthy so far as a house loan, may find that they can get the loan they want.In addition, more people will be willing to sell cheap homes using methods such as FSBO and lease purchases. This means that some foreclosure may be prevented and there will be viable buyers for some of the many thousands of houses that are out there waiting for occupants. That's the good news and for a change, most of it is for the buyer.

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