Financial institutions have acquired so many foreclosed homes to the point that a glut is forming and threatening recovery not only to the housing sector, but also to the economy in general.
Banks and mortgage lenders own more than 872,000 homes, almost twice as many as they did when the financial crisis began in 2007, according to RealtyTrac, a real estate data provider, as reported by the New York Times.
The number is sure to rise, as financial institutions are in the process of foreclosing on another 1 million more homes at the moment, which could put them on track to taking over several million more in the longer term.
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That all translates into lower housing prices and a weaker economy.
"It remains a heavy weight on the banking system," says Mark Zandi, the chief economist of Moody’s Analytics, according to the Times.
"Housing prices are falling, and they are going to fall some more."
The damage the glut that lender-owned homes is inflicting on the economy is already becoming apparent.
Housing starts fell 10.6 percent to an annual rate of 523,000 units in April thanks to the rising number of foreclosed homes on the market discouraging new projects, the Commerce Department reports. Building permits fell 4 percent.
"We're still struggling to find the bottom here for the housing market. It does not bode well for construction in the near term, and there's a good deal of overhang in terms of inventory," says Michael Woolfolk a senior currency strategist at BNY Mellon in New York, according to Reuters.
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