Here’s a financial crisis that may be about to happen. If you think that the housing crisis of the last few years was bad, then think again. A bigger housing price collapse may be in the making. Here’s what I mean.

There have been so many foreclosures, that the banks have had to take the homes back. There was just no one available to buy these homes. The banks had to tighten up on credit, which made fewer people eligible for loans. So the result has been a larger and larger inventory of homes in the banks hands.

At some point the banks need to release these homes to the marketplace. They need to do it faster rather than slower, because these same homes are tying up too much of the banks assets and money.

As soon as these homes hit the market, the law of supply and demand will kick into gear. A flood of homes will cause prices to collapse, because of the over supply on the market. Instead of ten 1600 square foot 3 bedroom homes in your area, there will be 50.

It’ll be tougher to sell homes. And prices will drop very fast and hard.

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