My CPA Skepticism and the Foreclosure Market, part 2 of the series
In my last blog I stated the housing market has a long way to go to get back to “normal” times. And normal is not the housing bubble days of 2004, 2005 and 2006. Rather the days of prudent lending and nice appreciation on your home of about 5% a year. Remember those days? You were happy then.
My reason for the skepticism is how many homeowners are behind on their mortgage payments and yet are still living in the home. The bank has not yet foreclosed on them. (Remember the banks are controlling the number of foreclosures.) This number is the reason for my doubts about a quick recovery in housing.
Figuring it out
According to KCM/LPS Mortgage Monitor, February 2010, had the following data:
% of Loans Not in Foreclosure with Associated Late Payments
- within the past 6 months 31.5% of all loans have associated late payments
- within the past 12 months 22.% of all loans have associated late payments
- within the past 18 months 17.8% of all loans have associated late payments
- within the past 24 months 24% of all loans have associated late payments
Reading the tea leaves
looking at the past 2 year figure, almost ¼ of all loans are seriously past due! In the “Mass Foreclosures” article I quoted in the first blog on this topic, states there are 7.3 million loans in some stage of delinquency, according to Lender Processing Services.
So, using a little math, if there are 7.3 million delinquent, and 24% of these are 2 years late in making payments, this means a very good chance we will see about 1.5 to 1.8 million foreclosures in 2011.
My prediction from looking at this and other data, 2011 will eclipse the 1 million foreclosures many are saying we will have in 2010, which beat the 2009 amount. 2011 will be another record breaking year for foreclosures. Unfortunately.
What is the result when there is at least 10 times the normal number of foreclosures hitting the market, and it looks like it will continue for a number of years? PRICING of homes is affected. Next we will look at pricing of homes in this new “normal” market. Jump aboard.
