At least 3 more years of housing troubles seen

WASHINGTON Tue Dec 7, 2010 3:25pm EST

A foreclosed home is shown in Chicago June 29, 2010. REUTERS/John Gress

A foreclosed home is shown in Chicago June 29, 2010.

Credit: Reuters/John Gress

WASHINGTON (Reuters) - The housing market will remain depressed, with record high foreclosure levels, rising mortgage rates and a glut of distressed properties dampening the market for years to come, industry experts predicted on Tuesday.

"We don't see a full market recovery until 2014," said Rick Sharga of RealtyTrac, a foreclosure marketplace and tracking service. He said that he expected more than 3 million homeowners to receive foreclosure notices in 2010, with more than 1 million homes being seized by banks before the end of the year.

Both of those numbers are records and expected to go even higher, as $300 billion in adjustable rate loans reset and foreclosures that had been held up by the robo-signing scandal work through the process. That should make the first quarter of 2011 even uglier than the fourth quarter of 2010, he said.

There have been allegations banks used so-called robo-signers to sign hundreds of foreclosure documents a day without proper legal review.

Mortgage rates will start to rise in 2011, further dampening demand and limiting affordability, said Pete Flint, chief executive of, a real estate search and research website. "Nationally, prices will decline between 5 percent and 7 percent, with most of the decline occurring in the first half of next year," he said.

Interest rates on 30-year fixed rate loans will creep up to 5 percent, and that alone will add $120 per month to the typical mortgage payment on a $400,000 loan, Flint said in a joint news conference.

The two firms released a survey showing a marked deterioration in consumers' views of the housing market, too. Almost half -- 48 percent -- said they'd consider walking away from their homes and their mortgages if they were underwater on their loans. That's up almost 20 percent from when the same question was asked in May. "If that continues it would be an epidemic of strategic defaults," said Flint.

Roughly 1 in 5 consumers said they expect it to be 2015 before there is a recovery in housing, according to the survey, conducted in November by Harris Interactive. Most respondents said they think recovery will come in 2012 or 2013. Would-be buyers suggested they wouldn't really get serious about purchasing a home for another two years.

Sharga sees a big glut in distressed properties hitting the market. There are about 5 million loans that are at least 60 days overdue, he said. In the next 12 to 15 months, another $300 billion in adjustable rate loans will reset, and "they will default at pretty high levels."

"Even with today's low interest rates, you're looking at an average of $1,000 or more in mortgage payments on loans that are overvalued by about 30 percent. That is where you will see a high level of walkaways," Sharga predicted.

Not all markets will share equally in the troubles. Flint said he expects to see improvements in several markets, including Raleigh-Durham, North Carolina; Austin, Texas; Oklahoma City, Oklahoma; Salt Lake City, Utah and Omaha, Nebraska.

Homebuyers who are willing to take risks and buy distressed properties are likely to see discounts of around 30 percent from prices on comparable homes that are not in distress.

(Reporting by Linda Stern; Editing by Kenneth Barry)

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Comments (5)
TankRisco wrote:
It’s about time some of the truth is making it into these articles. The stock market is way overvalued due, in part, to stimulus money, corporate tax breaks and hype. This is by no means a measure of the domestic or global economy. Think of the housing market as an obese person sucking in their gut on the beach. It might hold for a minute or two but eventually it will all roll out. Homeowners are sinking further and further into credit card and personal debt trying to “wait out” the market. Good luck to all.

Dec 07, 2010 2:22pm EST  --  Report as abuse
pjgatorjg wrote:
wow!! finally a story that i think most people agree on, with all the
B.S. coming out of wash. right now, i’m surprised the govt didn’t have an excuse or a coverup for this story!!!

Dec 07, 2010 4:52pm EST  --  Report as abuse
ROWnine wrote:
Up next Congress will reinstitute loan sharking penalties. Don’t hold your breath. Is there really that much default in this area that rates need to be in the 10 to 25 per cent range. I thought this was why these loan sharks were allowed to charge outragious late fees. Stocks are overvalued because they are worth what people pay for them. Shut off of the 401K’s, pension plans and money market plan monthly input and the ballon bursts, the companies become worth what assets and recievables (good luck if the buyer is unwilling or unable to make remittence) they have on paper. Maybe the CEO’s, COO’s & CFO can jump from the buildings they leveraged in order to get that golden parachute. Buy the way the US was a sleeping giant, as per Japan not because it had a great Army and Navy it was because it had the industrial capacity to field a great Army and Navy faster then the other guys could replace thiers. Now our only hope may be armed red necks driving Suzuki 4X4s and Toyota technicals and gang stah’s who are still loyal to US made SUVs so don’t be to rough on the home grown tarraistas. Greatest Generation? Congress persons shouldn’t believe everything they have read to them.

Dec 07, 2010 11:18pm EST  --  Report as abuse
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