Fewer foreclosures help stabilize home prices

Property values increased significantly in July and there were a number of factors that contributed to the gain.

Property values increased significantly in July and there were a number of factors that contributed to the gain.

At the end of July, prices were 5.9 percent higher than they were at the closing of 2011, according to the latest Standard & Poor's/Case-Shiller Home Prices Index A major part of this development was due to fewer distressed properties flooding the marketplace, the Wall Street Journal reports. While foreclosure activity is still elevated, property data indicates there were 45 percent fewer listings at the end of the month from two years earlier.

Some real estate experts accuse financial institution of holding numerous foreclosed houses off the market until prices increase enough to make a larger profit, but this belief is false, says the newspaper. Meanwhile, bank foreclosure inventories were actually 24 percent smaller than levels in 2011.

The nation's shadow inventory was supposed to be a major obstacle on the path to real estate recovery, but proved to be much less significant than first thought. This supply includes homes in some stage of the foreclosure process and vacant repossessed homes. So far this year, the shadow inventory declined by more than half a million units.  

Will prices continue to stabilize?
The fall and winter months often see fewer home sales, and this subsequently adds downward pressure to property values. However, as mortgage professionals continue to offer alternatives to foreclosure, seasonal declines may not be as large as they have been in the past.

Mortgage rates are currently hovering near record lows, which could provide a number of affordable options for households who are currently struggling with monthly loan payments. Meanwhile, government initiatives, such as the Home Affordable Refinance Program, could also help many borrowers avoid foreclosure.

HARP was designed specifically for underwater borrowers, as many of them can't qualify for conventional refinances. Most recently, during the week ending September 17, HARP accounted for roughly 22 percent of all refinances, according to a report from the Mortgage Bankers Association. 

Since its inception in 2009, the program has helped millions of struggling borrowers find alternative options to foreclosure, and may have been a major contributor to the falling foreclosure rates throughout the country so far this year.



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