The Bank Foreclosure Market Is Still Teetering
By Debra Wilson on February 9, 2011, 10:36 am
New foreclosures rose slightly compared with the prior year (2.19 million in December 2010, compared with 2.07 million in December 2009), says the LPS Mortgage Monitor report, which tracks a sample of 52.9 million loans across the country.
Foreclosure Inventory Is Up
What does this all mean? Overall, foreclosure inventory is up (3.8% of loans were in foreclosure in December 2009, compared with 4.15% a year later), more delinquent homeowners are taking a step closer to losing their homes, and the foreclosure process is becoming more bogged down.
Investors Took Losses
Many investors took heavy losses in the 2000-2002 bear market when even the blue chip S&P 500 lost 50% of its value. Many home-owners then got caught up in the housing bubble, maxing out mortgages that were unsafe unless home prices kept rising at a record pace. They lost sizable amounts when instead the housing bubble burst and home prices plunged. In too many cases they lost their homes as well. No sooner had the stock market recovered in the 2003-2007 bull market than investors lost heavily again in the 2007-2009 bear market, when once again the S&P 500 lost 50% of its value.
Economy Should Start To Move
Most analysts expect the economy to gain momentum this year, in part because of a tax-cut package that lowers workers’ Social Security taxes and puts more money in their paychecks. But two straight months of higher stress to end 2010 marked a setback after the nation’s economic pain had eased since the start of last year, the AP Economic Stress Index showed.
Bad Loans Being Squeezed Out
Overall, the trend is one of bad loans working their way slowly but surely through the system, LPS says. “The hose is kinked at the end, at foreclosure sale,” Mr. Blecher says. This could lead to a wave of houses moving from the “shadow inventory” of houses that come with distressed loans but are not yet for sale, to the for-sale market, which could further depress prices across the board.
