Impact of Moratorium on Foreclosure Home Supply

Key Points

• Moratorium Effects: The foreclosure moratorium, initiated by Bank of America, has led to a sharp decline in available foreclosure homes, particularly in Denver. This has intensified market competition.
• State-Specific Caps: Lenders have temporarily halted foreclosures in 23 states due to investigations into paperwork irregularities, further reducing available properties.
• Auction Trends: Public-trustee data shows foreclosure activity nearly doubled in the first half of the year but stalled in the third quarter. Early 2023 saw 12,172 properties auctioned, compared to 7,386 in the same period last year.
• Attendance Drop: Auction attendance has plummeted from over 130 people to just 15-30, despite regular attendees still showing up.
• Online Auctions: Auction houses are listing properties online to attract interest. Unsold properties revert to banks as Real Estate Owned (REO).
• Investor Concerns: Higher minimum bids, due to banks conserving inventory, worry investors about potential profit margins after costs like insurance and taxes.

Perspectives

Buyer’s Viewpoint

• Increased Competition: With fewer homes available, buyers face stiffer competition, driving up prices.
• Limited Options: The reduced supply limits choices, forcing buyers to act quickly or miss out.

Investor’s Viewpoint

• Profit Margins: Higher minimum bids and additional costs (insurance, taxes) squeeze profit margins.
• Strategic Buying: Investors must be strategic, considering long-term gains over immediate profits.

Denver Market Insights

• Supply Drop: Denver's foreclosure supply has fallen from 90-100 homes weekly to 30-40.
• Future Decline: As banks review foreclosure standards, the supply may decrease further.

Interesting Stats

• Foreclosure Rates: According to RealtyTrac, foreclosure filings were down 70% in 2021 compared to the peak in 2010.
• Auction Attendance: A typical auction now sees only 15-30 attendees, a stark contrast to pre-moratorium numbers.

Conclusion

The foreclosure moratorium has reshaped the housing market, creating challenges and opportunities for buyers and investors. As banks reassess their processes, the market dynamics may continue to evolve. For more insights on foreclosure trends, visit Zillow Research.

This article provides a comprehensive overview of the current foreclosure market, highlighting the effects of the moratorium and offering insights from both buyer and investor perspectives.