I was expecting a huge increase in Bank owned/REO inventory, but the Govt. interventions prevented or delayed that process. However, I can’t see how the banks would have any incentive to move these REOs because:
1) There was no way to value them under the previous M2M model (now that’s been eased, so the assets could be hidden/reported better)
2) TARP money was flowing…..why bother to create a bureaucratic system to deal w/ REO when you can ask for taxpayers bail outs.
However, the market forces are stonger, and it will catch up to those that fight against them (ARM resets, specifically in CA; unemployment; lack of move up buyers to support the system).
We’ll see. I hope I’m not wrong, but the current interventions (low rates) sold a lot of REOs lately.
