Are More Real Estate Foreclosures Coming?

Recently, I spoke with two friends who work in the banking and real estate industries about the future of the housing market. One friend asked the other: "Are we going to see more banks foreclosing on delinquent mortgages?" The reply came back without hesitation: "Yes."

It is hard to say if my friend is correct about whether banks will accelerate the number of houses they foreclose on in the near future. There are a huge number of delinquent home loans outstanding, secured by residential real estate. However, another important and less known fact is that delinquencies, foreclosures, and bankruptcies are dropping--and dropping quickly.

From the banks' perspective, it makes sense to clear the non-performing loans and associated real estate off of their balance sheets and try to move on. The unfortunate reality is that it is likely to take a number of years to sell the inventory that U.S. banks have already accumulated from foreclosures. Additionally, there are still many loans outstanding that are delinquent and have not yet entered foreclosure.

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