Foreclosure Hangups

The prior week’s news cycle was flooded with stories about both “vampire” and “zombie” foreclosures, two styles of toxic equity that still weight down the housing market. The horror-monster buzzwords aside, both foreclosure types remain prevalent throughout much of the country.

Vampire Foreclosures

As a story from CBS MoneyWatch outlines, “vampire foreclosures” are bank-reclaimed homes in which the original owners are still living on the grounds. Currently accounting for an alleged 47% of all bank-owned homes, many “vampire foreclosures” have been allowed to linger because banks had greater priorities than enforcing eviction. However, as the housing market continues to stabilize and bank refocus their resale efforts, certain areas may be hindered by incomplete foreclosures.

Citing the metros of Huston, Los Angeles, and Chicago in particular, the MoneyWatch article notes that these properties haven’t yet impacted regional housing prices. Banks have focused on reselling houses without complicated foreclosure status, which as helped buoy real estate values. As homebuyer demand continues to rise, and complete foreclosures become less available, banks will inevitably have to sort through the lingering inventory of vampire foreclosures.

The impact of prolonged residencies will naturally affect regions that have a higher volume of vampire mortgages. Their most pronounced impact will be on home prices, whose appreciation could slow or outright stall depending on the depth of property still occupied by financially troubled residents. Additionally, local banks could lose the confidence of investors and prospective homebuyers if it becomes apparent that they were neglecting their foreclosure responsibilities.

What About Zombie Foreclosures?

Saddled with another Halloween-themed moniker, “zombie foreclosures” are homes in which the owners have vacated the property, but banks are holding back on selling them. A sort of functional inverse to vampire foreclosures, zombie foreclosures are often being artificially pushed away from …read more