(MoneyWatch) Foreclosures are scary enough, and now we have "vampire" foreclosures. RealtyTrac coined the term phrase in a new report to describe a growing number of homes around the U.S. that have been seized by a bank, but are still lived in by the original owners.
An estimated 47 percent of bank-owned homes across the nation are still occupied by the previous owner, according to the real estate information company. In some cities, such as Houston, Miami, Los Angeles and Chicago, up to 65 percent of bank-owned homes are considered vampire foreclosures.
These homes, along with the 20 percent of foreclosures known as "zombies," where a homeowner has abandoned the property during the foreclosure process, will eventually have to come to market, said Daren Blomquist, vice president of RealtyTrac.
"This distressed inventory is artificially being held back so that in the short-term, it's helping boost the home prices and the housing recovery in general," Blomquist said. "But the red flag there is that eventually these homes are going to have to hit the market. They're not going to just disappear."
At some point, banks will want to sell these properties, particularly as home prices increase and they can get more bang for their buck. Combine the vampires, which number 250,000 nationwide, with the zombies,
which number about 150,000, and you've got about 400,000 homes poised
to hit the market. That's about 10 percent of the current volume of home sales.
"You're not talking about an overwhelming number, but as those start to be listed that will slow the pace of the recovery, particularly in home prices and particularly in markets where there's a high concentration of these homes," Blomquist said.
Beyond causing problems for the housing sector, when the banks want to sell such properties the families living in them are left in a tough spot. Frequently, these former homeowners are still in the homes because the bank gave them 90 days to leave. They may also be in the home as they fight the foreclosure because they believe they were improperly foreclosed upon. The banks may also be simply allowing the homeowners to stay to avoid the cost of maintaining the vacant property.
"As we see home prices rising and the banks getting a little bit more stable and dealing with fewer bad loans in the front end, they're going to be more motivated to deal with these homes and proceed with the eviction," Blomquist said.