Foreclosure myths?

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There’s much speculation now about why foreclosures are down even as defaults are up. Some wonder whether banks are deliberately slowing foreclosures to control the supply of REOs (real estate owned homes) for sale.

Sorry for the delay, but Carlsbad, Calif., broker Jim Klinge, aka ‘Jim the Realtor,’ posted Wednesday his opinion that there’s not much to those theories.

Klinge’s take? Basically:

1) Foreclosure delays may actually be caused by the borrowers and their Realtors attempting short sales and other actions that postpone the repossession.

2) Another huge wave of foreclosures won’t overwhelm demand. Klinge says in his area ‘if 1,000 McMansions hit the market and there isn’t demand, price will fix it.’ That is, prices will fall to the point they create demand, if that’s necessary.

-- Peter Y. Hong