Seven Million Foreclosures Likely
The real estate sector in the US is already in the dumps. As unemployment reigns high people falter on mortgage payments. Hence, foreclosures are at an all-time high. Now there is news of 7 million foreclosures of hitting the market. Once the banks take over these properties, housing prices is set to crash further. This was revealed by Amherst Securities Group LP analysts.
Owners of the homes have either failed to pay their mortgages or in the various stages of delinquency. This huge inventory can be compared to the situation in 20005 when 1.27 million homes came up for foreclosure. Analyst Laurie Goodman says that even if no more foreclosed property is assumed to be in the market then also it would take 1.35 years to palm off these properties at the current pace.
SP/Case-Shiller index has brought out a report that helped to analyze that the housing market slump is over. According to the report, value of homes in some areas has increased over the last three years. The drop in prices has been reduced by almost 31 per cent.
There has been a change in the number of traditional sales. That has given a temporary boost to prices. The number of foreclosures had also remained static as banks could not handle the foreclosures due to shortage of staff. However, the positive changes will soon disappear as seven million foreclosed homes hit the market. The number of foreclosures has suddenly increased as borrowers have defaulted on loans. Some are on the brink of foreclosure. However, banks are still taking a long time as they are preoccupied with loan modification programs
The Federal government had come up with the loan modification program to stop foreclosures. However, experts assume that homeowners will not be able to pay even the revised amount. Most of the homes are underwater.
The analysts are, however, not able to predict the home prices. They say that the recovery of the housing market will be dull as a fresh stock of foreclosed homes flood the market. They say that there may be 8 per cent depreciation in home values.
The Barclays analysts had predicted that there may be a 13 per cent reduction in home prices. At least that has not happened so far. They had also observed that the fresh supply of foreclosed homes would suck the life out of the real estate market. The situation is not as grim, say experts.
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