The number of sheriff sales in Springfield, Ohio has dropped in recent months, even as our local economy has fallen off a cliff since September. I have heard that his is happening elsewhere and may be the result of the Fannie and Freddie, holiday eviction moratorium, HOPE Now programs, and other local, national, public and private initiatives.
Our REO listing inventory in Dayton and Springfield spiked in December 2008, and January 2009. It has currently leveled off concurrent with fewer sheriff sales.
Does this mean the foreclosure crises is over? I doubt it, but I am not sure why we are in this lull either – especially when vacant housing stock is at an all time high. Dayton, Ohio was recently highlighted as the fourth most vacant city in America.
One theory is that the banks are so overwhelmed that they are paralyzed. Another is that given how the loans were sold, identifying the actual owners of the properties is time consuming and problematic. A third and perhaps more cynical explanation is that the banks are holding back on foreclosures and sales in an effort to protect their bottom lines.
The argument goes that an entity only has to show a loss when it experiences a loss. Regardless of the value of the asset on the balance sheet, there is no operating loss until it is sold. With this in mind it makes sense that there was a burst of activity near the end of the banks’ fiscal year. It also makes sense that until lending stabilizes to the point that there are clear and consistent operating profits, that banks would keep these assets on the books until they are able to ‘hide’ the losses amidst new profits.
In any case, I believe there will be more foreclosed housing stock hitting the market in the next few months. On the other hand, this anecdotal experience may mean that investors who wish to buy low and hold, need to get off the fence and into the game sooner rather than later.
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