Smart-Stock.net

According to a recent article in The Wall Street Journal, banks and other financial institutions are acquiring foreclosed homes at a faster rate that they can sell them. Fannie Mae in particular purchased 44,071 homes during the first half of 2008, but has only sold 23,627. As of June 30, their balance of unsold homes was 54,173.

This bleak picture isn’t likely to change in the immediate future. Barclays Capital puts the tally of bank-owned American homes at 721,000, compared to just 112,000 two years ago! Furthermore, they expect an increase of 60% before the end of 2009.

As you can imagine, Fannie Mae and other financial institutions saddled with these foreclosed real-estate properties are very motivated, possibly even desperate, to sell them. Specifically, bulk purchases at very low prices, such as those we’ve chronicled elsewhere on this blog, are now being accepted, when in more robust economic times it’s unlikely they would even be considered.

As the saying goes, one man’s trash is another man’s treasure. The foreclosed accounts that U.S. banks are so eager to sell, even at less than 50% of the price such accounts were worth a few years ago, spell opportunity for saavy and motivated investment firms that specialize in management of distressed assets.

While this is bad news for many Americans, certain investors can eventually turn a profit by acquiring these foreclosed accounts in bottom-dollar bulk purchases, holding onto them until America’s real-estate crisis abates, and then selling them at top-dollar prices.