I think the banks will hold on much longer than most people expect.
I think it is the size of the defaults. If the losses are small, then the banks will be more willing to take a loss. However, the problem is so large that banks know selling will probably make them shut their doors. The choice is recognize the loss now and possibly shutter its doors, or take the drip drip drip of missed payments and hope/pray/wait for the market to rebound/stabilze enough.
Another possibility is that the banks are holding on to properties until they can build up enough reserves to be able to safely write off the losses.
Part of me wonders if this strategy will actually work. We end up a decade or more of low sales and high prices.
