If the economy is improving, do we really have millions more foreclosures coming? According to the U.S. Treasury, the answer is yes. In written testimony to Congress, Assistant Secretary for Financial Institutions, Michael Barr said that, regardless of the success of mortgage modification efforts, we should still expect millions more foreclosures.
Mr. Barr’s testimony is certainly not welcome news for those anticipating a significant recovery in the housing market. In fact, it is an indication that significant recovery is still years away.
And there are other factors that confirm the fragile state of both the economy and the housing market. Recent reports have indicated that there are almost 3 million active, interest-only loans with a total value of almost $1 trillion, with loans of about $500 billion set to reset within the next 30 months. Then we have a large group of Option Arm mortgages set to recast during the next 2 years. These loans have a combined value of more than $125 billion.
The rising number of bankruptcies, up 36% in the second quarter over last year, with wealthy families filing at double that rate, creates a “perfect storm” of disastrous consequences for the housing market. With the likely prospect of millions more foreclosures coming, home prices and home sales will remain depressed until the market can achieve stabilization. And achieving stabilization will be a slow and painful process.
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Millions More Foreclosures Coming
Via John Mulkey, Housing Guru (TheHousingGuru.com):
5 comments • Ed & Cindy Knight • September 12 2009 05:22PMComments
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A very spot on assessment of market conditions. And nobody seems to be able to explain recovery and more foreclosures because the 2 thoughts conflict.
I also agree that you are right on the money.
Wow! Just when I thought we were close to getting out of the woods, somebody grew a new forest in front of me! It sure seems like this thing is never going to end, but then when I look back on it, I remember buying homes and thinking, "great, I just hope it appeciates a lot, so I can step up and buy the next home." Years ago, we never paid that much attention to the price of the home compared with other values and I guess because I have bought mostly new homes in my life, I have never had to worry about condition or location, because in a development everything is new, everything is nice, everything is shiny and everything will go up in value. So now we are seeing the results of all of that and I look back and wonder if it wasn't for the secondary market how different it certainly would have been.
Michael I can not take the credit for this it was written by John Mulkey but I agree the two thoughts for sure conflict
Mark & Tim the credit goes to John on this one
Gary new forest is a great way of saying it - as always life would be much better IF we could only look into the future