They might as well call it the unemployment-foreclosure index because as long as unemployment hovers around the double digits, the number of foreclosures in this country is going to continue to rise.
Despite talk of economic recovery, it hasn't reached the housing market where realtors predict thing are going to get worse before they get better. In fact, even though foreclosures are expected to top 1.2 million this year, up from 900,000 in 2009, Realtors say 2011 will top both of those numbers.
The primary culprit, according to Rick Sharga, Senior Vice President for RealtyTrac, is the continued high unemployment combined with the upcoming interest-rate resets on adjustable-rate mortgages that will increase monthly payments for some homeowners.
He adds that some foreclosures that had been on track this year were delayed by the so-called "robo-signing mess that prompted some banks to put their foreclosures on hold after learning procedures for signing off on some documents might not have been kosher. Also, data on the volume of loan modifications from the Treasury Department indicate that fewer borrowers were approved for permanent modifications in the past few months.
Jay Brinkmann, chief economist for the Mortgage Bankers Association, during a recent conference call with reporters says the answer to the problem involves trying to get job growth which will help homeowners pay their loans and enable others to buy homes.
Long term, the outlook for the foreclosure market appears to be improving since fewer homeowners are becoming delinquent on their mortgage payments. Brinkman says 30-day delinquencies are down 11% since the first part of 2009, and loans 60 or more days past due are expected to fall nearly 20% by the end of 2011.
According to a forecast from credit-reporting company TransUnion, delinquency numbers will continue to improve if unemployment declines. But that's a big if. So far, unemployment hasn't budged much, even though economists predict the job picture will begin to pick up in 2011.
Falling prices
Meanwhile, housing prices are expected to continue to fall in those areas hardest hit by unemployment. In those areas jobless rates are approaching 20%.
Combine high housing inventory, along with high unemployment, and you get continued depressed home prices in the year ahead in many markets. That's according to Nichole Jordan, banking and securities industry practice leader for Grant Thornton, an accounting and business advisory firm. She predicts it will take several years to work through the excess inventory.
And she's looking two years down the road to 2012 for anything resembling a recovery in housing. She adds that even then, we're a long way off from any kind of stabilization, and she thinks it's going to be more like five to seven years before prices stabilize.
