Because of the delays in foreclosures in 2010 and the large number of homes in the pipeline 2011 is expected to be even worse than 2010 in foreclosure processing and the number of families that actually lose their homes.
CNBC’s Diana Olick warns that those looking to some recovery during the spring house buying season will probably be disappointed because of the lingering impact of robo-signing and the glut of distressed property on the market.
Rates have now jumped over the 5% mark, reducing buyer incentive to jump into the market. Home values will go lower, increasing the number of distressed homes that can only be sold with a Short Sale.
New homes are unlikely to take up much of the housing slack because builders are not discounting new homes to keep up with the reductions in the prices of used homes. New homes are predicted to take only 7% of the market in 2010. In a normal year new homes will be 17% of the market.
Olick expects distressed sales to surge again in the spring as repossessions move over the 100,000 per month mark. The increase in distressed sales will cause the overall value of housing to fall further behind. She does not believe there are enough all cash investors to sop up the inventory of distressed sales.