The major banks aren’t dummies. Even if they’re changing their foreclosure rules, there’s no way they’re going to dump thousands of properties on the market overnight. And even if they tried, the government would intervene to present incentives for them NOT to, because they know it would set off a massive deflationary spiral that would tank the entire economy. One example:
I know lots of people on this forum are waiting for houses to drop another 30-40% so they can get them at rock-bottom prices. Be careful what you wish for. If that were to happen, there would likely be riots in the streets and major police action. We’re starting to cut into “real” gains at this point – eg equity from 10+ years ago, pre-bubble.
What is far more likely is we will continue to see this walking-on-eggshells slow drip down of a handful of REO’s coming onto the market each month over the next 5+ years. The banks aren’t dumb. They know if they threw everything onto the market, it would tank prices, which would only screw themselves. They’re going to drag it out as long as possible, and barring another major liquidity crisis, that will be years and years.
