CNBC.com

I know we talk all the time about how foreclosed properties drag overall home prices down.

They are blights on neighborhoods, they often are sold off in “short-sales,” where lenders sell the home for less than the mortgage, and they are often left in a horrid state of disrepair, thereby lowering prices even further.

Well here’s a stat I hadn’t quite visualized: First American Core Logic, which runs real estate numbers out in California, reports that the number of bank-owned (REO) properties nationwide rose to 660,000 in April.

That’s up from 493,000 in January and just 231,000 in January of 2007. That’s all despite so many programs that have been working at high speed since January to save troubled borrowers.

Okay, so let’s do some math. In April there were roughly 4.55 million existing homes (National Association of Realtors) for sale in the nation and 456,000 new homes for sale (U.S. Dept. of Commerce). So roughly 5 million total.

Now I know that not all REO homes are listed on the MLS (Multiple Listing Service) where the NAR gets its stats, so this math is not exactly perfect, but let’s say for the sake of argument that most of them are.

If there are 5 million homes for sale and 660,000 of them are previously occupied, now-foreclosed homes, that means that one in seven homes on the market today is a foreclosed home. One in seven! With one in seven homes being sold at below market value, how can the rest of them do anything but continue to lose value?

I don’t care what anyone says about location, the economy, supply, demand, jobs, etc. Until the tidal wave of foreclosures shrinks back down to at least surfing size, the bottom in home prices is still going to be far off at sea.

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