Foreclosures Represent "Tip of Iceberg" : Housing Crisis Has Not Hit Rock Bottom

GSIG LLC

Foreclosures represent the “tip of the iceberg,” despite some reports that indicate the housing crisis may be hitting rock bottom.

Real estate analyst/investor Bruce Norris told hundreds of investors attending a seminar held in California this past weekend that numbers indicating firming home prices and fewer foreclosure auctions are actually “illusions.”

Government mandated loan modification programs make the numbers appear lower. However, in reality, they are delaying the inevitable inability of homeowners in trouble to hang on to property that has dropped in value.

Meanwhile, Norris states, “re-defaults on loan modifications are ‘sabotaging’ government efforts.” Mortgage delinquencies will continue to skyrocket because of the following:

• The resets of the Option-Arm loans will cause a larger number of foreclosures than the sub prime loans.

• Resets are part of the problem, but a bigger concern is the owners who owe more on their home than it’s worth.

• Commercial loans and credit card losses will soon add to the problem.

• Unemployment is a significant factor. Norris states: “I think we will fall back into recession by the end of 2010, and the unemployment rate and underemployment rate will be about 20% in 2011.”

• Owners are finding it more and more acceptable not to make their house payments. The mindset, according to Norris: “I see my next door neighbor has stopped making his payment, and he just bought a camper. You can see that coming. We haven’t really been through the biggest part of the problem.”