In the article, “Mass Foreclosures This Year Expected to Eclipse ’09 Levels” http://www.foxnews.com/us/2010/07/15/homes-lost-foreclosure-track-eclipse-levels-banks-work-backlog/
Information is Power
it states nearly 528,000 homes have been taken over by banks for the first six months of this year. At this rate we will eclipse the 900,000 foreclosed homes that occurred in 2009. To put this number in perspective, in “normal times” lenders foreclose on about 100,000 homes annually. We are going to have 10 times this number this year!
About 1.7 million homeowners received a foreclosure related warning between January and June of 2010. The warnings can be first time late payers to those receiving their final warning two years later – they are late in payments and are on a course to foreclosure. Studies have shown that once a homeowner gets 60 days behind, it is almost a certainty the home is going into a distress sale situation.
Now if 1.7 million homeowners are on this path, and the majority will default, (let’s assume a 75% default rate) that gives us 1,275,000 potential mortgage defaults – AND THIS IS JUST THE FIRST 6 MONTHS OF THIS YEAR! Annualized we are over 2.5 million potential mortgage defaults.
So why isn’t the number of foreclosures higher? Because “the banks are really sort of controlling or managing the dial on how fast these things get processed so they can ultimately manage the inventory of distressed assets on the market” says Rick Sharga, senior vice president at Realty Trac, a company which follows distressed sales.
Figuring It Out in today's market
Therefore, if we have a potential 2.5 million defaults, and only 1 million are hitting the market this year, this tells me we have considerable “shadow inventory” waiting to hit the market in 2011 and later.
Shargo states “assuming the US economy doesn’t worsen, aggravating the foreclosure crisis, it will take lenders through 2013 to resolve the backlog of distressed properties that are on their books right now.”
In my opinion housing is not anywhere close to being “normal”. It could easily be 2015 or later. If the economy continues as it is currently, my bet is later.
