4 Reasons Why Foreclosure-Gate Will Only Be BAD For Home Prices

happy couple home

Earlier Henry Blodget argued that at least in the very short term, foreclosure-gate could provide a lift to home prices, as the (de facto) moratorium would stem the flood of foreclosures on the market.

Of course, he acknowledged they’ll all come to market in the long-term, so for sellers this might be a good window to get out.

Here are some reasons why there may be no silver lining at all:

  • Foreclosure-gate is making BUYERS nervous: Suddenly, buyers are terrified that they could buy a home which they might not be able to get into. You might go buy a home that’s currently on the market, and then end up waiting for months as paperwork issues get dealt with. It might be a better to just wait this period out.
  • Buyers aren’t fools, they know the foreclosures will come eventually: Housing may not be the most efficient market, but if everyone knows that a flood of foreclosures is coming down the pike, that will have a depressant effect.
  • This will make banks even more hesitant to lend: This crisis could cause even more damage to bank balance sheet. What’s that going to do to mortgage availability?
  • Homes in foreclosure depress the price of homes around them: Homes stuck in limbo fall into disrepair and depress the price of houses around them. That phenomenon is going to get worse the longer this drags on.

Are we wrong? Tell us why.

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