Transcripts

The Bank Owned Property Boom

PAUL KANGAS: Adding to worries that the housing downturn is nowhere near over, the head of KB Homes today said that he sees home prices in California falling another 10 to 15 percent over the next year and a half. That comes as banks and other lenders are increasingly becoming home sellers. As Stephanie Dhue reports, inventories of bank-owned properties are growing as the nation's foreclosure rates soar.

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Nearly 400,000 homes have entered foreclosure already this year and many of them are sitting on the market. Countrywide Financial alone has nearly 14,000 homes listed for sale on its web site. Countrywide's Steve Bailey says his company isn't interested in having a fire sale on its growing inventory.

STEVE BAILEY, MANAGING DIRECTOR, LOAN ADMINISTRATION, COUNTRYWIDE: In no way are we trying to dump any properties. Essentially we are trying to make sure that property sells for the market that it's in for a reasonable price.

DHUE: But the definition of reasonable is changing. In many once-hot markets, home builders are now slashing prices as more homes glut the market. Guy Allen specializes in selling bank-owned properties in Prince William County, Virginia. He expects banks to soon re-price some of their properties.

GUY ALLEN, BROKER, ONE STOP REALTY: Sometime around the next 30 to 60 days, we're going to see a major drop in pricing. Banks are going to realize that, OK, we've got to get our prices in line with where the rest of the market is if we want to sell this inventory.

DHUE: While those lower prices will help clear out bank inventory, it will also put more pressure on other would-be sellers. Mark Fleming of Corelogic says banks selling at deep discounts can create a vicious cycle for homeowners looking for a way out of their mortgages.

MARK FLEMING, DIRECTOR OF ECONOMICS, CORELOGIC: If they face a payment reset or divorce or job loss, something that causes them to not be able to make their mortgage payments, that makes the situation worse for them and they are then more likely to go into foreclosure.

DHUE: Analysts say banks face a dilemma. While holding out for higher sales prices may keep the housing market from falling faster, it may also be stalling a housing recovery. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Dale City, Virginia.