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» VISIT US ONLINE @ DSNEWS.COM COVER STORY COVER STORY MARKET PULSE TECH FOCUS The once-strong stock of bank-owned homes is dialing down in many markets, and numbers seem programmed for a brusque ebb and flow. LEGISLATIVE REVIEW T he number of foreclosed single-family homes held by lenders and government agencies is rapidly declining, with more delinquent borrowers avoiding foreclosure and fewer properties entering the foreclosure process. Investors, asset managers, agents, and other real estate practitioners who hoped to build up their businesses from a surge in the inventory of real estate owned properties, or REOs, are shifting their strategies to adapt to the current market. Spotty Supply POINT— COUNTERPOINT A number of experts from across the industry agree that REO inventory today is approximately half of what it was when the volume of bank owned foreclsoures hit its post-crisis peak. The most recent numbers available from RealtyTrac, through February 2013, put the REO count nationwide at about 647,000 properties. REO inventory in the United States peaked at just more than 1 million properties in January 2011 and then bottomed out at 532,000 in August 2012. Despite the slight increase between August 2012 and February 2013, Daren Blomquist, VP for RealtyTrac, says he expects the long-term trend for REO inventory to be down with REO numbers at the end of 2013 lower than the one-year-earlier numbers. Pre-REO properties—a category that encompasses properties in default and those slated for foreclosure auction—peaked in November 2010 at 1.2 million, according to RealtyTrac's data. In February of this year, the number of pre-REO properties totaled 865,000. Typically about half of pre-REO properties will end up as bank-owned properties, Blomquist explains. Jed Kolko, chief economist and head of analytics at Trulia, says most local markets are largely through their individual foreclosure crises, so delinquencies are down sharply and most local-market REO inventories are declining. In a few markets, REO inventories are growing but only because a wave of homes is finally making its way out of the foreclosure pipeline, not because more homes are going into foreclosure. In New York and New Jersey, for example, where foreclosure involves a drawn-out judicial process, less than half of the homes that will eventually go through the foreclosure process have done so, according to Kolko. The transition rate from foreclosure to REO, however, is "likely to be a slow trickle rather than coming in waves" because the lengthy judicial process creates such a backlog, Kolko said. The REO inventory in February for the 26 states that follow a judicial or quasi-judicial foreclosure process totaled 290,000 properties, according to RealtyTrac. For the 24 states and the District 49

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