As foreclosure activity rises in 2012, housing experts call for more bulldozing

More real estate experts are forecasting larger-than-expected U.S. home price declines, as foreclosures make their way through the market. Citing Moody’s data, Bloomberg News reported that sales of repossessed properties will rise 25 percent this year from the 1 million such sales recorded in 2011.

Because repossessed properties sell at a 35 percent discount from lenders’ valuation of the homes — and a 60 percent discount for distressed homes on the market for two years, according to the Federal Reserve Bank of Cleveland — home prices are sure to fall with the continued foreclosure activity.

Because foreclosed homes are rarely maintained, some analysts say many will need to be bulldozed to prevent further decimation of nationwide housing prices.

“The question on these aging foreclosures is how many are going to be sold and affect prices and how many will be complete losses,” said Karl Case, one of the creators of the Case-Shiller home price index who expects home prices to fall 5 to 10 percent this year. “Some of the supply in the bin is going to have to be dumped.” [Bloomberg]