According to information from RealtyTrac, foreclosure activity nationwide increased by 2.5 percent in September and bank repossessions topped 102,000 - the first time they have ever surpassed the 100,000 mark - meaning that the current supply of foreclosed homes on the market is very high, and affordable properties are widely available.
But economists also said that in the coming weeks, the actions taken by lenders in the wake of the spiraling foreclosure scandal could drastically reduce the number of available homes, driving up prices on those that remain.
"If the documentation issue cannot be quickly resolved and expands to more lenders we could see a chilling effect on the overall housing market as sales of pre-foreclosure and foreclosed properties, which account for nearly one-third of all sales, dry up and the shadow inventory of distressed properties grows - causing more uncertainty about home prices," said James J. Saccacio, chief executive officer of RealtyTrac.
Banks have faced growing criticism in recent weeks for allegedly improper foreclosure practices in which employees failed to verify the information in foreclosure documents before signing them. Officials from all 50 states have started an investigation into the controversy.
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