Fed: Judicial Foreclosure Processes Thwart Price Gains


This is just a classic case of supply and demand. No great surprise here. Please read the article below and let me know what you think.

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The number of days a property spends in delinquency status prior to foreclosure is relatively similar across all states. However, once a property enters foreclosure, the number of days it spends making its way through the foreclosure process and back to market varies drastically with the key determinant being whether a state is a judicial or nonjudicial state, according to information presented at “Distressed Residential Real Estate: Dimensions, Impacts, and Remedies,” a conference hosted by the Federal Reserve Bank of New York and the Rockefeller Institute of Government held in the fall.

The Federal Reserve Bank of New York released findings from the conference on its website Monday.

Not only did the conference reveal a vast difference in foreclosure timelines between judicial and nonjudicial states—something discussed at length in various industry reports and news articles in the past—but it also revealed the impact of lengthened foreclosure timelines.

“[C]ontrolling for the magnitude of the decline in home prices from peak to trough, we observe that home prices have recovered considerably more in the non-judicial states,” reads a blog post on the New York Fed’s website.

Because judicial states take longer to process foreclosures, many have amassed large backlogs of shadow inventory waiting to make its way to the market.

“The larger the REO inventory, the slower the growth in house prices holding constant a variety of other traditional drivers of house prices,” the Fed stated in its report from the conference.

The blog post did point out one exception to its findings. Despite North Dakota’s status as a judicial state, the state is experiencing strong price increases. However, the blog post authors attribute this exception to a housing shortage caused by an energy boom in the state.

To read the complete article – please use the link below.

Processes Thwart Price Gains

Explore posts in the same categories: Real Estate Market Trends

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