Foreclosure Crisis to Drag on for Another 9 Years?
While there has been some positive news on the home foreclosure front, we’re a long way from seeing the end of the foreclosure crisis if a recent Wall Street Journal article is to be believed. And, it makes a pretty strong case.
According to the article, Number of the Week: 103 Months to Clear Housing Inventory, it’s going to take 103 months, or roughly 8.5+ years for all of the homes in foreclosure to be sold. The article puts it this way:
The number of months [103] it would take to sell off all the foreclosed homes in banks’ possession, plus all the homes likely to end up there over the next couple years, at the current rate of sales.
The End of the Home Foreclosure Crisis: “Fuzzy Math” or Not?
In a presidential debate in 2000, George W. Bush accused Al Gore of using “fuzzy math” when it came to some of the Democratic party’s economic calculations. So, are we up against this again. Are housing experts using fuzzy math to calculate how long it’s going to take us to dig out from under the foreclosure crisis?
As with most things when it comes to politics and the economy, the truth lies somewhere in the middle. Following is why and how.
Foreclosures Up: According to the article, “As of March, banks had an inventory of about 1.1 million foreclosed homes.” That figure represents a 20% increase from just one year earlier.
This may be the one factor that while on the surface seems bad, it can actually be a good thing. Why? Because foreclosures will eventually level off. We’ve had record numbers of them since the fall of 2007, when this whole foreclosure mess started. But, even though it’s still a slow recovery, the economy is showing signs of improvement.
This has been one of the foundational reason so many have lost their homes to foreclosure. Once jobs start coming back, this means fewer homeowners will be be at risk of foreclosure. So while a 20% jump is high remember, we just came through a period where there were record numbers of unemployed. Unemployment was recently at a 26-year high.
Things will start to level off.
Shadow Inventory: This was the most alarming part of the article. FYI, shadow inventory are those homes in foreclosure or preforeclosure that haven’t been fully been accounted for in official foreclosure numbers. The Wall Street Journal article notes:
Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process, meaning their homes were well on their way to the inventory pile. That “shadow inventory” was up 30% from a year earlier.
We talked about this in the post here entitled, Some Banks are Purposely NOT Foreclosing on Homeowners in Default: Here’s Why. This has to be dealt with — head on. The government is trying, which brings us to the last point of discussion here, ie. . .
HAMP Mortgage Refis and Loan Modifications: Even though the Obama administration’s prevent foreclosure program has been roundly criticized for not doing enough to help homeowners face foreclosure, it’s something. And, the program has recently been expanded to help even more homeowners at risk of losing their home.
While it may take some time, as people get back to work, more of them will qualify for the help under these programs. Also, many lenders are taking the lead and offering their own programs (eg, loan modifications) to struggling homeowners.
Bottom Line: Will the Foreclosure Crisis Last Another 9 Years?
Probably not — IF the economy continues to improve. If there’s one thing that’s true about Americans — we are a nation that loves to spend — especially if it’s a bargain. And as more people get jobs and see that they can buy foreclosures cheap, the lagging inventory will be snapped up by eager house-hunting bargain shoppers.
At least we can hope, no?
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Copyright © 2010 Yuwanda Black for Foreclosure Business News. Article may not be reprinted or reproduced in any manner without the express, written consent of the author.