If you have been out shopping for a bank foreclosure or REO lately you probably have noticed less and less of them on the market.  Why is this?  Well there could be several reasons for it.

1.  More buyers in the market.  Sales are on the rise albeit slow but they are rising.  Every buyer out there is looking for a deal and most people feel they can find that deal in the REO market and so that is where a lot of the market activity has been, thus depleting the inventory.

2.  Banks are not foreclosing on properties.   Because new law added regulations, it is making it harder for banks to foreclose on homeowners.  Hawaii is not allowing automatic non judical foreclosures on primary residences.  In other states the banks are being tied up with law suited because of illegal foreclosures.  The banks reaction to this is that they are not in any hurry to foreclose.  Another contributing factor is that the banks already have enough bank inventory of unsold foreclosures and really don’t want any more right now, thus delaying foreclosure action on many delinquent home owners.  Below is a great article detailing this.
http://www.msnbc.msn.com/id/44099816/ns/business-real_estate/

3.  The banks are slowly putting the inventory they do have on the market.  The banks understand that if they just flood the market with all there unsold inventory it will drive prices down even further.  Because of this, they are slowly bringing on the inventory they do have and trying to gradually raise prices.  Not only are the banks concerned about the value of all the unsold foreclosure inventory they have but all the homes out there that the homeowners are still paying on.  They don’t want to drive the values down so much that those people loose hope and start defaulting on their loans.

My opinion is we will see a steady flow of REO’s over the next 1-1.5  years with the banks gradually raising prices.  I think the banks will shift more to the short sale vs foreclosure as a way to dispose of there toxic loans.  Either way there is a termendous opprotunity right now for buyers.  With rates down in the 3% and prices down 30-40% affordability is off the charts.   If you would like more information on homes in your area give em a call or drop me a line and let me know how I can help.