Predicted Flood Of Delinquent Homes Has Failed To Materialize; Instead, Burgeoning Demand Counters Short Supply

Now, there is a shortage of houses that cannot meet burgeoning demand. Even after the five largest US mortgage servicers reached a $25 billion settlement with state and federal regulators, the predicted flood failed to materialize.
Banks are now stepping up efforts to find alternatives to foreclosures. They are forgiving debt, modifying payment plans, and approving short sales to avoid legal problems.
The federal government’s expanded loan modification programs are gaining traction and, along with the Fed’s commitment to keep interest rates low, are helping to stabilize the market.
As the unemployment rate continues to decline, concerns about destabilization of the market by a flood of foreclosures are fading.
Home prices in 20 US cities rose 3% in September and an index of pending home sales climbed 5.2% in October.
The median price of an existing home went up 11% last month from a year ago. The shadow inventory of pending foreclosures is shrinking as new defaults decline and banks work through their backlog of bad loans.
If the economy slows, pending and new foreclosures could become a renewed threat. Robert Shiller, co-creator of the S&P/Case-Shiller Home Price indexes says that, historically, housing markets are difficult to predict.  
He also says the wisdom of delaying foreclosures was based on political motivations rather than economic ones.

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