Floyd Norris has a very nice column in the NYT today comparing foreclosures with home sales. It points out that in the areas hit hardest by the collapse of the housing bubble foreclosures now exceed homes sales. Of course not every foreclosure results in a home being put up for sale, but most do. In fact, the percentage that do result in sales are likely to be higher today than in the past because fewer mortgage holders will bother with foreclosure proceedings on second mortgages. Because house prices have fallen so much in many areas, and a first mortgage generally has prior claim over a second mortgage, most banks no longer bother filing for foreclosure on second mortgage debt in places like Florida and Las Vegas, since they would not collect anything anyhow. The Implication of this story is that a large number of homes will still be put up for sale regardless of how much builders cut back on construction and homeowners try to delay putting their home on the market. In other words, the folks who say that the housing market will stabilize any time soon must be smoking some really strong stuff.
--Dean Baker
