Doesn’t look good for many people, so what is your Plan B in 2010?
Read this recent article from Foreclosuredump.com
The housing market is going to continue to deteriorate through 2010 as the number of foreclosures overflowing the market continues to rise. Here are 4 reasons to support this prediction:
- Unemployment: Joblessness is the main cause of new foreclosures in the United States. The unemployment rate is expected to reach 10.5% by the third quarter of 2010 and to stay above 10% for many months ahead. Lack of jobs is also the reason why prime loan delinquencies have surpassed subprime loan delinquency. As people lose their jobs, they deplete their savings and begin to fall behind on their mortgage payment, which ultimately leads to a foreclosure.
- Option ARMs: According to BusinessWeek it is estimated that between 2004 and 2005, approximately 1.3 billion people took out an option ARM loan for a total of $389 billion. These have just begun to recast and will continue well into 2010. When an adjustable rate mortgage recasts, payments double and even triple, causing people to default and eventually go in foreclosure. According to a report by Moody’s, more than 40% of option ARM borrowers are at least 60 days past due on their mortgage. 54% of these outstanding adjustable loans are in the state of California. Florida is second with 13%.
- Inventory: There is a shadow inventory which includes properties that banks are holding, properties that are at the beginning stage of the foreclosure process, as well as those that are yet to go into foreclosure in the coming months and years. Many banks are hiding foreclosures because they don’t want to show these toxic assets on their books this year. Therefore they will begin to unload these foreclosed properties on to the market in 2010.
- Prices decline: The excess inventory of foreclosures is going to flood the market thus bringing home prices down by up to 30% in parts of the country. The decline in home prices is also going to be fueled by the lack of permanent mortgage modifications that have been accomplished under the Home Affordable Modification Program (HAMP) program. Only about 1% of the 3.3 million eligible mortgages have been permanently modified, which means thousands if not millions of people are going to lose their homes, increasing the number of foreclosures in the United States.
Although the media may give us the impression that we are on the way to recovery, the fact is that it’s going to take a while before we start to see significant improvement in the housing market, foreclosures in particular.