Seven Million Foreclosures Likely
The real estate sector in the US is already going south. As unemployment climbs higher and higher, more people are finding it harder to pay off their mortgage dues. Hence, foreclosures are at an all-time high. Now there is news that 7 million foreclosures may hit the market sooner than expected. Once the banks take over these properties, housing prices are set to crash even further. This was revealed by the Amherst Securities Group of LP analysts.
Owners of homes nowadays have either failed to pay off their mortgages or are in the various stages of delinquency. This occurrence of so many distressed homeowners can be compared to the situation in 2005 when 1.27 million homes went into foreclosure. Analyst Laurie Goodman believes that once a foreclosed property is put on the market, it could take about 1.35 years to sell it off.
The SP/Case-Shiller index has brought out a report which stated that the housing market slump is over. According to the report, the value of homes in some areas has increased over the last three years. The drop in prices has been reduced by almost 31 percent across the nation.
There has been a change in the number of traditional sales as well, which has given rise to a temporary boost in prices. The number of foreclosures has also remained static because banks cannot currently handle the huge amount of foreclosures cropping up due to staff shortages. However, these positive changes will soon disappear because seven million foreclosed homes will hit the market. Recently, the number of foreclosures has seen a sudden increase as more and more borrowers are defaulting on their loans. Some of these borrowers are on the brink of foreclosure. However, banks are still taking a long time to go through with these processes because they are preoccupied with loan modification programs.
The federal government came up with the loan modification program in order to stop foreclosures from happening. However, experts believe that homeowners will be unable to pay even the revised amount. Most of the homes are underwater.
Analysts, however, are unable to predict future home prices. They say that the recovery of the housing market will be slow due to a fresh stock of foreclosed homes projected to hit the market. Analysts believe there may very well be an 8 percent depreciation in home values.
The Barclays analysts also have predicted that there may be a 13 percent reduction in home prices. But, so far, this has not happened. They have also observed that a fresh supply of foreclosed homes could suck the life out of the real estate market. However, the situation is not as grim as Barclays experts predict, say experts.
