The continued rise in foreclosed home inventories in many areas across the country has hindered recovery efforts by homebuilders, real estate businesses, investment banks and other companies involved in the housing industry.
According to home builders, realtors and economists of Freddie Mac, Fannie Mae and the Mortgage Bankers Association, the housing decline may bottom in June, but will not recover until late in 2010 or early 2011.
The economists predicted that sales of existing homes will not reach stable levels until next year’s third quarter and that housing starts will not surpass the 1-million level until 2011.
Yale University professor Robert Schiller, who helped create the home price index now used by S&P, said the recovery of the housing market will be slow because of the record size of the decline.
Based on the S&P/Case-Shiller home price index, foreclosed home inventories are still pushing down the housing market. In March, house prices in 20 metro areas declined by 18.7 percent compared to March 2008 as more housing units are added to foreclosed home inventories.
Three of the country’s biggest investment banks collapsed after foreclosed home inventories wiped out their investments in securitized mortgage loans. Bear Stearns Cos. was taken over by JP Morgan Chase with the help of the federal government, Merrill Lynch & Co. was acquired by Bank of America and Lehman Brothers Holdings filed the biggest bankruptcy in the nation’s history.
All the three investment banks bought mortgage-backed securities sold by Wall Street firms that created the securities out of high-risk adjustable mortgage loans offered mostly to borrowers who were not screened properly.
Based on Federal Deposit Insurance Corp. data, around $40 billion of mortgage loans nationwide are already in default by three months or more, more than three-fold the $11.5 billion worth of units already in banks’ foreclosed home inventories. FDIC also reported that nearly $79 billion worth of mortgage loans are already one month to three months overdue.
The Federal Reserve also reported that over 2 million homeowners have mortgage loans with Alt-A terms as of March, with 28 percent held by third-party owners who do not stay in the mortgaged properties. Alt-A mortgage loans allow homeowners to pay less during the initial payment period, but require them to pay drastically increased monthly payments after the initial payment period lapses.
Rick Sharga, executive of foreclosure tracking service RealtyTrac, said that a new wave of foreclosed home inventories will occur when owners of option ARM and other risky loans will default after their monthly payments balloon to unaffordable levels.
Author Resource:-
John Cutts has been educated in the finer points of the foreclosures market over 5 years. Read foreclosure listings articles at ForeclosureListingsNationwide.com - Your online source for Foreclosure Listings.
![[Valid RSS feed]](http://www.realestateproarticles.com/images/icon_Rss.png "XML Feed For RSS"){kind=icon}
Category Rss Feed
Print This Article
Add To Favorites