Presidents Obama’s administration asked for a moratorium on foreclosures while they enacted new programs to assist the struggling home owners and the foreclosure market slowed to more manageable levels. As a result, the housing inventory began to decrease, home prices stopped their steep decline, and buyers started making offers. Optimism around the housing market has slowly improved and news on foreclosures has slowly dwindled away.

Bruce Norris, a California Real Estate Analyst, in a TNG radio interview May 16th, said that the current low inventory levels are giving ‘a false indicator’. He said that the shadow inventory (foreclosed homes that the banks are sitting on) and new NODs are going to give us a second wave of high foreclosures sometime in 2009.

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Leslie Appleton-Young, VP & Chief Economist for the California Association of Realtors agreed with Mr. Norris predicting “a second wave of foreclosures 4th quarter of this year when the Option Arms start adjusting”. The adjustments and continued loss of jobs will force more foreclosures as income streams dry up. She predicts that the “Obama initiatives for loan mod will hopefully help by some extent but will not mitigate a second wave of foreclosures.”
Fitch Ratings, an international rating agency, forecasts that even with the loan modifications, between 55 to 65 percent of those mortgages will become delinquent by 60 days or more within the first year of the modification. If this forecast is accurate, additional foreclosures and inventory will eventually be dumped on the existing housing market.

It appears that no one has the full, true picture of what the foreclosure market looks like or will look like in the future. Even the federal government’s recent ‘stress test’ for the major banks receiving bail-out dollars did not provide a clear view other than to reiterate the fact that sub-prime mortgages will more than likely end up in foreclosure.

While not all economists agree on the future of the housing or foreclosure market, most say that house prices have not hit the bottom and will drop further. Lawrence Yun, Chief Economist with the National Association of Realtors, wrote that “distressed sales (foreclosures and short sales) are accounting for almost half of all resales”. He blames the unemployment rate and expects it to hit double digits by the end of the year which will further exacerbate the foreclosure problem.

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According to Norris, in order for the housing market to normalize and stay that way, “we need to get through the bulk of the foreclosures”. Unfortunately, it doesn’t appear that anyone, including the federal government or the banks, has a good grasp on how many foreclosures are currently being held much less how many will be expected in the future. It’s bad and it will probably get worse. Only time will tell how much worse

Author Andee Nast is free lance writer, California Realtor (License #01854926), and Real Estate Investor. You are welcome to contact Andee at andeen@charter.net or on her website www.andeeallen.com

Source: Huliq.com