Nothing surprising here. The bulk of foreclosures are in 4 states. Real estate being largely local, house prices in these states will lag considerably the rest of the US over the next several years.

(…) The John Burns Real Estate Consulting study estimates that five million houses and condominiums on which mortgages are now delinquent will go through foreclosure or related procedures that put them on the market over the next few years. That would represent the bulk of the estimated 7.7 million households behind on their mortgage payments.(…)

The shadow inventory is equivalent to 27 months of sales in Orlando, 24 months in Miami and 18 months in Las Vegas, the study estimates.(…)

John Burns, chief executive of the consulting firm, said investor demand for foreclosed homes remained strong. Thus, he said, prices were likely to be about level over the next few years, despite the looming foreclosure supply, if the economy continued to recover and mortgage interest rates didn’t rise sharply. But if the economy slumped anew and interest rates jumped, he said, "that’s going to cause prices to fall further." (…)

Some borrowers are catching up on payments after having their loan terms modified, but S&P says current trends suggest that 70% of such borrowers eventually will redefault.(…)

Full WSJ article

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