Recovery in both real estate and employment has taken longer than we ever anticipated, and even though there are signs of stabilization in both areas, we are managing to a lower set of expectations for the foreseeable future. Underwater borrowers, along with continued high unemployment, remain the biggest threats to the housing recovery. At the end of last year, among all U.S. homes with a mortgage 24 percent were underwater. Those properties are mostly in California, Arizona, Florida, Michigan and Nevada.
It is predicted that home prices will decline into next year, Fannie Mae said, reversing earlier projections that the housing market would stabilize this year. After the expiration of the home buyer tax credits, transactions began falling immediately and were down to around 30,000 at the end of July. Although, foreclosures, though down from their 2009 highs, still average well over 300,000 homes per month. While it takes a record 461 days to complete a foreclosure, on average. Fannie Mae said that it expects its inventory of repossessed homes "to continue to increase significantly throughout 2010."
The market got a major lift from a federal tax credit for first-time home buyers, a program that spurred sales but is no longer available to new buyers, that boost did not ripple after the tax credit ended. The first-time home-buyer tax credit, which expired April 30, helped 2.5 million people buy a home, while the Home Affordable Modification Program, which helps borrowers modify mortgages rather than face foreclosure, is on pace to help 3 million to 4 million homeowners by 2012.
The rumors are continuing to grow louder that the Obama administration is planning to announce a massive stimulus via the housing market later this month. Earlier this week, the word was that the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac might subsidize mortgage refinancing at below-market interest rates. But today, a possibility is being talked about where the GSEs instead (or maybe also) forgive the principal on the underwater mortgages they own or guarantee.
Home prices, as best we can judge, have really flattened out in the last year. And while it is true that most economists expect a small dip from here largely as a consequence of the ending of the home buyer tax credit, the data does not show that at this particular stage.
Here's a look at the number of foreclosure filings since the Home Affordable Modification Program began its first trial modifications in March 2009. Permanent modification of loans began in July 2009.
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