There’s no simple solution to protecting your home, and many companies claiming to offer loan modifications and foreclosure prevention have turned out to be scams. Lots of struggling homeowners have been tricked and ended up losing money that could have saved their homes. The Federal Trade Commission (FTC) is trying to fight these fraudulent companies, but they often find out too late, after people have already lost their homes and money.
With around 3.7 million foreclosures on the horizon, people are wondering how this will affect the real estate market, stock and bond markets, and the overall economic recovery.
Don’t be fooled by the recent drop in foreclosure numbers. In April 2011, foreclosures were down 34% compared to the previous year. There were 219,258 foreclosed properties in the US in April 2011, down from 332,209 in April 2010. However, this decrease doesn’t mean fewer homeowners are in trouble; rather, it’s because banks are overwhelmed and can’t keep up. According to RealtyTrac’s CEO, James J. Saccacio, the slowdown is due to delays in foreclosures, not because the housing market is getting better.
Foreclosures have been rising each year: 1.3 million in 2007, 2.3 million in 2008, 2.8 million in 2009, and 2.9 million in 2010. So, the big question is, how many more homes will we lose this year? Data from the Mortgage Bankers Association shows about 3.7 million properties are seriously delinquent, suggesting real estate values may not grow significantly until 2013. Over 13 million homes might face foreclosure before the market starts to recover.
Pete Flint, CEO and Co-founder of Trulia, agrees with this outlook, predicting it will take at least 18 more months for prices to stabilize. He also noted that many Americans have unrealistic expectations about how quickly the housing market will bounce back. Surprisingly, Flint suggests that now might actually be a good time to get into the housing market, despite the potential for short-term price drops.
In summary, the real estate market is currently unstable. With at least four million homes still in trouble, prices will likely keep falling. However, with interest rates at a 40-year low, financing a purchase now might be more affordable than in the future. If you’re looking for properties that will give you positive cash returns and are prepared to hold onto them for over seven years, now could be a wise time to invest.
If you’re struggling with an underwater mortgage, don’t give up hope. In 2010, there were 1.76 million permanent loan modifications. Get help from HUD-approved counselors by calling 1-888-995-HOPE. The HOPE NOW Alliance is a network of counseling groups that offer debt management, credit counseling, and foreclosure assistance.