Foreclosures continue to climb
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Kai Ryssdal: Not that you necessarily needed or wanted more evidence that the housing problem just won’t go away but it won’t. Not even a little bit. Home foreclosures, already at an all-time high, keep on climbing. The real estate data firm RealtyTrac said today that banks will likely repossess more than a million homes by year’s end — that’s up 38 percent from a year ago.
We asked Marketplace’s Mitchell Hartman to try to figure out when it might end.
Mitchell Hartman: Keep in mind, foreclosures continue to increase, even though all those “bad-toxic-really-dumb” mortgages people took out during the housing boom are mostly behind us.
The problem now, says Sarah Wachter at the Wharton School, is all the people who can’t pay their mortgages because they’re unemployed, or don’t want to pay because they owe more than their house is worth.
Sarah Wachter: We have a long way to go in many of these markets before home values rise to equal the level of the mortgages these households are paying on, or in this case, actually, not paying on.
Wachter says low home values will lead to even more foreclosures. The foreclosed homes get priced cheap by the banks, just to move them off their books. It’s a vicious cycle, says housing analyst Desmond Lachman at the American Enterprise Institute.
Desmond Lachman: We could expect housing prices to decline by perhaps another 5 to 10 percent over the next year, before eventually stabilizing.
There is one bit of encouraging news, though. Banks are actually sending out fewer foreclosure notices. This is the first step when a homeowner gets behind on their mortgage, long before the house is actually seized. I asked Wharton’s Susan Wachter what’s going on?
Wachter: Lenders are increasingly looking to other options — loan modification, short sales, as lenders have more experience with them. And indeed, as homeowners are coming to terms with the fact that they really have few choices.
And Wachter says, between all the foreclosures and short sales now on the market, plus ridiculously low interest rates, it really is cheap to buy a house again.
I’m Mitchell Hartman for Marketplace.
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