Washington Home Prices and Foreclosure

Washington Home Prices and Foreclosure

Washington Home prices are likely to resume crashing because of 7 million properties soon to be seized by lenders that have not yet hit the market, according to Amherst Securities Group LP analysts. A “huge shadow inventory” of mortgages already being foreclosed upon or now delinquent and facing foreclosure compares with the 1.27 million foreclosures seen in 2005. Based on the current pace of existing-home sales, and assuming no other homes are on the market, it would take 1.35 years to sell the properties. [Bloomberg]

Laurie Goodman of Amherst Securities, a New York investment firm specializing in mortgage-related assets, explained, “Loans continue to transition into the delinquency/foreclosure pipeline at a rapid pace, but are moving out at a very slow pace.” Goodman warned, “That housing overhang is the single largest impediment to a recovery in the housing market."

As the clock is ticking down, troubled Washington homeowners are scrambling to qualify for the Obama Loan Modification Program in order to secure a successful home loan modification. Every Washington homeowner should immediately explore their options, and confirm whether or not they qualify for savings and assistance under the Obama HAMP.

While falling Washington home prices and government-induced perks like low interest rates and sizable tax incentives have helped sales activity and values bounce up from recent lows, real recovery hinges on how many additional properties from this “shadow inventory” eventually hit the market.

By analyzing data from the Mortgage Banker's Association, which tracks 80% of mortgages, Goodman discovered that 13.5% of home loans were in some stage of delinquency at the end of May; 4.3% were in foreclosure; 3.9% were considered “seriously delinquent.” After estimating the likelihood that those borrowers would somehow, perhaps through a loan modification, keep their homes, Goodman found that nearly 7 million homes will be lost to bank repossession, representing almost 18 months' worth of existing-home sales (currently at modest clip of 5.2 million annually). [Forbes]

Analysis by Amherst shows the amount of pending foreclosed-home supply has been escalated by more borrowers going into default, fewer being able to catch up once they do, and longer time periods to seize properties because of issues such as loan-modification efforts and changes to state laws. [Bloomberg]

Amherst cautioned that a change in the mix of foreclosure and traditional sales over different parts of the year lifted prices in the period, as the distressed share shrank. “The favorable seasonals will disappear over the coming months, and the reality of a 7 million-unit housing overhang is likely to set in,” they said.

Using additional data from First American Corelogic, which cover 29 million mortgages, Goodman estimated an additional 240,000 mortgages will become delinquent each month. At this rate, the Obama administration's $75 billion in loan modification programs, still slowly working through the system, has little time to help troubled homeowners.