In 2011, foreclosures fell to the lowest level since the recession. "Only" 1.9 million homes received foreclosure filings last year, compared to more than 2.7 million each in 2010 and 2009. According to foreclosures may rise 25% in 2012, as banks work through the shadow inventory they accumulated during the "robo-signing" investigation. (Source: Bloomberg, "Home Seizures May Jump 25% This Year as U.S. Foreclosures Resume," January 17, 2012)
RealtyTrac CEO Brandon Moore said, ""There were strong signs in the second half of 2011 that lenders are finally beginning to push through some of the delayed foreclosures in select local markets. We expect that trend to continue this year, boosting foreclosure activity for 2012 higher than it was in 2011, though still below the peak of 2010."
However, Celia Chen, an analyst at Moody's, said that housing is "poised for better days" once the backlog is cleared, possibly in 2013. Housing is undervalued, especially if you compare prices to incomes -- the ratio is well below the average for the last 20 to 30 years.
What It Means to You
If you are underwater on your mortgage, look for President Obama to announce a new program to help you in tonight's State of the Union address. This program will hopefully be more powerful than the HARP or HAMP programs.
Unfortunately, the underlying fault lines that caused the subprime housing crisis still remain, according to former IMF Chief Economist Raghuram Rajan. Banks and hedge funds still reward managers for generating large profits, and don't penalize them for undertaking the risks needed to gain those rewards. Once the economy is fully in the expansion phase of the business cycle, this motivational structure could generate another housing bubble.Until these underlying "fault lines" are addressed, says Rajan, "We risk going from bubble to bubble."
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(Credit: Justin Sullivan/Getty Images)
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Comments
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