There's a lot of talk on the blogosphere about "phantom Inventory". That's the new name for homes banks have taken back but are sitting on. For some unknown reason they are holding homes and not listing them as soon as they foreclose. There's much speculation as to why they are doing this. The most logical to me is that they don't want to flood the market with REO properties. This would drive the prices down even faster than the 5% per month they are currently dropping. But on the flip side if a bank holds a home for 6 months they probably have lost 15% to 20% of what they could have got by selling right away.
Case in point,
514 Wrightwood Rd, Corona. This is a former model home. It was built in 1997. It sold new for $220K when the development built out in late 97. It sold again right at the peak in Sept 2006 for $580k. The bank took the home back in Jan 2008 for $496k. Even back in Jan there is little chance they could have sold this for the balance of $496k. But they probably could have gotten close. A house just a few doors up the street sold in March for $395k. Another sold in June for $350K. And yet the banks still did not put this home on the market. I've been driving past this house for nearly a year wondering when they would list it. Well, wonder no more. It hit the market this week. Listing price, $262,500. At that price this should attract some attention. Especially from the guys that just paid $350k 4 months ago..... I'm sure this will get bid up unless it's thrashed inside. But I'm also quite certain it will not get bid up $88k to make the June buyer feel better.
The question remains though. Why did the bank wait? If they had put this home on the market back in Jan, when they took it back they probably could have gotten close to $400k for it. Now they will be lucky to get over $300k.