Home foreclosures are expected to cause the housing inventory to increase in 2010 as a rising number of homeowners are defaulting on their home loans.
In 2009, a record three million homes went into bank foreclosure. Analysts predict 3.1 million home foreclosures in 2010. The federal home loan-modification program, which is part of the stimulus package, has not improved home foreclosure rates.
Many financial institutions did not have the resources to modify defaulted home loans. Additionally, the program doesn't work for many people, as 61 percent of modified home loans in 2008 still went into bank foreclosure.
Why Will Bank Foreclosures Continue to Rise?
The projected number of bank foreclosures will continue to rise for many reasons, including:
* continued high unemployment.
* the expiration of stimulus package programs that have helped the housing market.
* the large number of adjustable rate home loans that are due to be reset to higher interest rates.
* the postponement of repossessions in 2009 due to pressure from the federal government to modify home loans.
* very low home prices in the real estate market, which cause many homeowners to owe more on their home loans than their homes are worth.
Will the Stimulus Package Programs for the Housing Market Be Extended?
The real estate market has shown some positive signs in late 2009 due to low home sale prices, low mortgage rates, and a home tax credit program that has been extended and expanded.
However, many of the housing portions of the economic stimulus package are scheduled to end in the spring, which is a crucial time for home sales. For example, the home tax credits for first-time home buyers and repeat home buyers expires at the end of April unless they are extended again.
In addition, the Federal Reserve stimulus program that is buying back mortgage-backed securities and agency debt is scheduled to end on March 31. However, there are indications that the program may also be extended, depending on the economy.
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