RealtyTrac estimates that 47% of the nation's foreclosed homes are currently occupied. One of the problems for the banks is the prevalence of leases which must be honored. Another problem is the time it takes to evict under local landlord/tenant laws.
These factors have led the banks to use cash-for-keys programs as an incentive for homeowners who have lost their homes at Sheriff's Sale to move out.
Banks are referring to these homeowenrs as "vampires." The banks disparage these homeowners and blame them for sucking the life out of the housing market, but the real problem may be that banks are slow to take back ownership of these properties because the market demand is insufficient to absorb all these properties if they hit the market at once.
“The concern with these homes is that they are inevitable inventory that had been delayed from hitting the market,” Daren Blomquist, vice president at RealtyTrac said. ”We don’t anticipate these properties will derail the housing recovery when they hit, but they will certainly take some of the steam out of the recovery.”
Given these facts it is difficult to understand why more is not being done to reform bad loans and keep homeowners in their homes. Surely, this is a better solution than for homeowners to live in the homes after sale like squatters or for the homes to sit idle. This is exactly what is happening in the marketplace.
In about 80% of cases in Cape May County and Hudson County, the banks do not bother evicting the homeowners, but allow them to live in the property indefinitely.
With New Jersey foreclosures still averagin 1002 days, it is a wonder that the banks begin the foreclosure process with no end game in sight.
Some commentaotors claim that these "vampire" properties will hurt the housing market and remain in "shadow inventory" and other commentators claim that the recent increase in housing prices nationwide will lead to a resurgence of bank interest in these properties.
In all, estimates are that there are about 400,000 homes in vampire/zombie status making up a shadow inventory, together with 20,000 to 40,000 new homes entering foreclosure per month. The long term effect on the housing market is far from certain.
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