Short sales unlikely to harm housing market

According to Housing Predictor, the volume of distressed home sales in which lenders reduce the amount of principal owed (short sale) is likely to increase in 2010. In an effort to boost the housing market, the Treasury Department recently passed rules for expediting short sales that take effect in April. Major lenders such as JP Morgan and Bank of America are hiring more staff and IT support so they can handle higher volumes of short sales and foreclosures.
Despite these developments, experts believe short sales will have little impact on the U.S. housing market because bankers have been refusing to accept the deep below-market prices real-estate agents want for short sales.
So far short sales have barely made a dent in overall housing sales: According to the Office of the Comptroller of Currency, only 40,000 short sales were completed in the first half of 2009, the latest period available. Also the number of short sales approved by banks is less than 1% of all homes at risk of foreclosure.
However, a bank’s refusal to do short sales may waver as a second wave of foreclosures hits the market. For example, distressed properties for sale are on the rise in Southern California—Dana Point has seen its inventory of foreclosures and short sales rise to more than 24% of all homes listed for sale and nearby Laguna Beach and San Clemente have seen similar increases.