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About those job cuts and foeclosure trends. . .
comments (0) December 15th, 2008 in Blogs
Richard Defendorf, contributor
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The other day we mentioned that the 2009 Outlook presented by real estate information specialist ForeclosureS.com highlighted a decline in the number of repossessed houses nationwide. The report also indicated that, because prices have dropped so far, buyers would return next year and begin pulling the market out of its slump.
It is true that loan modification programs and laws designed to delay the foreclosure process have helped lower the foreclosure rate.
The problem is, the number of loan defaults and foreclosure auctions is predicted to increase next year, right along with unemployment. A recent Bloomberg story cites Labor Department figures showing that initial jobless claims increased to 573,000 in the week ended December 6, the highest level since November 1982, while the number of workers staying on benefit rolls reached 4.429 million, also the most since 1982. U.S. companies slashed payrolls by 533,000 last month, the fastest pace in 34 years, for a total of 1.9 million job cuts so far this year.
Bottom line: As many as a million borrowers could lose their homes next year, due in large part to growing unemployment.
As foreclosure specialist RealtyTrac put it, 2009 could see a “storm” of foreclosure activity, most of which will result in lender repossessions.
“Something like 70 percent of subprime foreclosures are beyond the reach of modification programs because the owners are investors, because the owner is in default for the second time on the property, or because the owner has disappeared,” Stanford University Professor Robert Hall told Bloomberg.
It is possible, though, that the Federal Reserve’s new – but largely untested – lending programs to banks, Wall Street firms, and money market funds could help free up credit to those who do have jobs, including current and prospective homeowners, and builders and remodelers still hanging on. The Fed has tapped into its reserve of cash and Treasury securities to make these loans, although more recently has had to create new money to keep its loan programs going.
The Fed balance sheet, a New York Times story points out, has grown to about $2 trillion from about $900 billion in September.
posted in: Blogs, business
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