Foreclosures Continue Dragging Home Prices Lower [AUDIO]

If you're looking to sell your home, you may want to wait a bit.

As the number of foreclosures continues to rise in New Jersey and nationwide, home prices are heading downward.

"Banks and financial institutions aren't in the business of managing properties, so when they take over a foreclosure, they want to get it off their hands as soon as they can, so they sell it for a heavily discounted price," said Pat O'Keefe, Director of Economic Research at J.H. Cohn. "When a rise in the number of foreclosures happens, the inevitable result is downward pressure on prices."

"That includes the prices of those homes that would be a conventional sale," he said. "In current circumstances, the volume of foreclosures is going to increase substantially here in New Jersey over the next six to nine months simply because of a backlog that accumulated due to administrative and legal reasons. As those properties come on the market, they will be substantial enough to significantly influence the market."

"For those sellers who can wait until the end of the third quarter, that downward pressure should begin to abate," said O'Keefe. "The process of foreclosures is not driven by conventional economic forces. It's not about supply and demand. It's simply a business transaction that went bad and the asset, which happens to be a home, is coming back to the market at a discounted price."