Batch of foreclosures poised to enter market

Prices may drop for as many as 1.25 million homes which will be auctioned soon now that delayed foreclosure processing has resumed, according to a report by Bloomberg.

Investigations into foreclosure practices prevented these properties from being sold previously, and the amount of time they have spent in processing is likely to lower prices as much as 10 percent, data firm RealtyTrac reports. Many of the inquiries were resolved in February, allowing these homes to re-enter the market. Some areas may see prices drop significantly as a result, depending on the concentration of properties.

Federal Reserve Chairman Ben Bernanke told Congress in January that vacant U.S. foreclosures may be suffering from disrepair and lack of maintenance that contributes to low prices. Many homeowners may have delayed expenses prior to the foreclosure process due to tight finances, and some vacant homes in poor shape may be eliminated while those in better condition are sold.

This may benefit investors to an extent, by reducing the number of homes on the market and maintaining quality of available properties, to an extent. Reduced inventory could help counteract the effect of these foreclosures on home prices and strengthen the position of rental managers as well by limiting the housing supply.

Homes can lose 35 percent of their price in less than a year spent unoccupied, one federal analysis indicates, or 60 percent with two years of waiting. Moody’s Analytics projects 25 percent higher sales of repossessed property this year.