For a year or so there have been stories of more foreclosures coming.  While I don’t doubt the warning and we’re starting to see a tick up in sheriff sales, I do think that given the speed that the banks are going that it will be 2011 before we see much of this expected surge of foreclosure/REO inventory on the market.

Minnesota Home Ownership Center’s report of mortgage delinquency (pre-foreclosure) notices are very high, a lot of the increasing delinquencies are sitting in limbo in the period prior to a Sheriff Sale.  I’m sure some of these homeowners are working through mortgage modification programs and/or short sales but I also have experienced situations where the bank will take more than a year to begin the foreclosure process and/or delay the Sheriff Sale for months.  This leads to a backlog of “shadow inventory” that some day will show itself.

In Minnesota we have an unusually long Redemption Period – from the date of the Sheriff Sale most homeowners have 6 months in which to occupy the property and atwww.t to redeem it – unless the homeowner did a 5 month Sheriff Sale postponement and instead has a 5 week Redemption.  From my experience, on average it takes foreclosed homes 2 weeks to 2 months after the Redemption Period to find themselves on the MLS – length often varies by lender, occupancy of the property and condition.

So if a house is sold at Sheriff Sale on May 1, the we’re likely not to see that house on the market until mid-November to early January.  This is helpful in some ways as it allows us to get a feel for what future REO activity on the MLS will be.  Given that recent months of sheriff sales are up, it does suggest an increase of new foreclosure MLS listings late in the year but given the very low inventory in that category right now I don’t believe any increase of new REO listing activity will have an impact to our market dynamics yet this year.

Here’s a current set of charts from the data I collect (click charts for larger versions):