Make no mistake, the fallout from the housing bubble is still raining down on us. 2011 saw a slow down in housing foreclosures as banks litigated in court over robo-signing and nefarious practices. Now, in 2012, the banks are good-to-go. Mortgages in default that have been allowed to fester over the last year or so are about to feel the blade of the axe.
Delinquent homeowners, many of whom stopped making their mortgage payments altogether, will soon see foreclosure proceedings executed with great malice and efficiency. As this process unfolds a new phenomenon will rear its ugly head again – downward market-value pressure from more bank REO properties hitting the market.
The final blow to the housing market has always been the ultimate resetting of Option ARM and Alt-A mortgages originated in 2006 to 2007. These loans which take a full 5 years to mature into full principal and interest payments were mostly made to high income earners and on big mortgage amounts in the more affluent neighborhoods. Ultimately, when these homeowners realize they are paying two and three times what their new neighbors pay for their mortgages, people who we never thought would walk from their homes will join an exodus of their disillusioned brethren.
Zillow.com has their own take on the upcoming foreclosure wave. Read more here…
EARLY SIGNS OF UPTICK?
Zillow expects the resurgence in foreclosures this year, combined with excess inventory of unsold, bank-owned homes will contribute to a 3.7 percent national decline in prices before the market hits bottom in 2013 and stays there until 2016.
“The hangover from this crisis will far outlast the party of the boom years,” said Zillow chief economist Stan Humphries.
Getting through the remaining foreclosures and dealing with the resulting flood of homes on the market in the wake of the bank settlement is a necessary part of the healing process for the U.S. housing market, he added.
According to leading broker dealer Amherst Securities, some 9.5 million homes are still at risk of default and in February it said it expected to see the uptick in foreclosures start to hit in March and April.
There is other evidence that many of the foreclosures that did not happen in 2011 will happen this year.
A January report by the Neighborhood Economic Development Advocacy Project in New York found that in the first half of 2011 the number of 90-day pre-foreclosure notices in New York City outnumbered court foreclosure actions by a ratio of 14 to one, indicating that while proceedings were initiated against many homeowners, they were left incomplete.
“Now the banks have a settlement, foreclosure numbers for 2012 are going to be high,” said NEDAP co-director Josh Zinner.