For all those curious what the potential impact of an escalation in the GMAC Bank scandal may mean for the housing market, look no further than Phoenix. According to a new report by the Arizona State University W.P. Carey School of Business in Phoenix alone foreclosures and REOs account for 67% of all home sale transactions. According to author Jay Butler, out of 8,790 resales, 3,990 were foreclosure sales. This compares to 3,865 in July and 3,085 in August 2009. Adding REO sales to foreclosures, and the total become a whopping 67% of home buying activity in August, meaning just a third of all resales occurred in the traditional method were a buyer and a seller arrived at a price after arms-length negotiations. This is stunning, as it means that should the foreclosure pipeline get clogged up courtesy of the GMAC snafu, and price discovery will become completely impossible, as banks are stuck holding real estate they are legally prohibited from offloading in judicial states. Luckily for Arizona, it is not such a state. For home buyers in the 23 states in which GMAC has halted evictions and certain foreclosures indefinitely, the home buying process is about to get really complicated.
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