Scary Housing Predictions
In case we weren’t depressed enough about the state of the economy and the state of our own personal finances, media outlets have to go and survey the powers-that-be for their opinions. Scary doesn’t really begin to describe it.
According to this CNBC story, home prices are unlikely to recover before 2020 and mortgage defaults will persist for years, says a recent survey of bank risk managers. That’s just wonderful news. The survey conducted by the Professional Risk Managers’ International Association for FICO, found that 49% of respondents do not expect housing prices to rise back to 2007 levels for another nine years. Only 21 percent of respondents said they would.
The findings, which authors called “a decidedly pessimistic outlook”, are a sharp reversal from cautious optimism the survey respondents expressed late last year and in early 2011. In addition, 73 percent of surveyed bankers say they expect mortgage defaults to remain elevated for at least another five years. And 46 percent believe mortgage delinquencies will increase over the next six months.
Only 15 percent of respondents expect mortgage delinquencies to decline during that period.
Why Are Bankers So Pessimistic?
These are opinions only, of course, but they do come from the very bankers who are studying the housing market and its continued declines in many markets. At this point, statistics tell us that 1 in 80 homes nationwide is in some stage of foreclosure. This was a 33% jump in just one month to a 9-month high. In Florida the figure is 1 in 44, in Illinois 1 in 43, 1 in 37 in Arizona. Nevada leads the nation with 1 in 20 homes in foreclosure while our own California has 1 in 48.
What Do These Figures Mean?
We all know that foreclosed homes are sold more cheaply as banks, not being in the real estate business, do everything in their power to sell them fast. Every home that goes into foreclosure pulls its local market down by a small increment. When many are sold as REOs [real estate owned], the local market as a whole is lowered. As prices dip, nearby homeowners are losing their equity; those on the edge are then driven underwater. Once a homeowner is underwater, the impetus to pay the mortgage lessens as it hardly seems worth it.
At this point, the economy as a whole is performing badly. Millions are out of work and can’t pay their bills, including their mortgages. Those that are able put more and more on credit cards until the issuers pull the plug. Millions of people are using retirement money to get through this tough spot. The trouble is the tough spot is lasting for years and their grown children cannot find work either.
Enter the banks. The banks, as we all know are wallowing in cheap cash from the Fed, but are reluctant to lend. On their books, left over from their giant party during the “bubble” years are trillions of dollars of bad mortgages which by now everyone is realizing will never be made good. Instead of settling for less by restructuring these bad loans or offering temporary loan mods, the banks are instead simply dumping these properties onto an already-saturated market.
We know what will happen next. As Bank of America, for instance, with huge inventories of bad loans from its acquisition of Countrywide, especially here in SoCal where the company was located, is slammed with plummeting stock prices, the urge to get the non-performing loans off the books is overwhelming. And, so more foreclosures hit the market, spiraling prices down and creating more underwater mortgages, more future foreclosures.
Is it any wonder the bankers are pessimistic about the chances for a housing recovery? Housing cannot recover until the wider economy pulls itself out of the ditch and gets back on track. When will that happen? In the meantime, should you be considering a short sale, call me.
Thinking about a short sale? I can help you short sale your property and never pay the bank another penny. Send me an e-mail at drdbroker@gmail.com. I will contact you for a free consultation. If you prefer to stay in your home, perhaps a loan mod, a refi or mortgage litigation is the best route for you. During our consultation, I will be happy to help you come to the right decision for you.
When we talk, I will explain how the short sale process works in detail and answer any questions you may have about either short sale or mortgage litigation. Or, if you prefer, you can call me at (626)641-0346.
Diane Butler specializes in helping Pasadena Homeowners short sale and never pay the bank another penny. Pasadena Loan Modification Help, Pasadena Short Sales, Pasadena Short Sale Realtor, Pasadena Realtors, Pasadena Realty, Pasadena Realtor. Altadena Short Sales, Altadena Short Sale Realtor. Azusa Short Sales, Azusa Short Sale Realtor.
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