Foreclosure Data Mixed for 2011
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Most recent data from the Office of Thrift Supervision indicates approximately 1.2 million homes are in the foreclosure process. This represents a 10% increase from one year ago, but may not be as bad as it sounds. Banks are beginning to work through the backlog of distressed properties on the books, and according to the Office of the Comptroller of the Currency, 87% of the 33.3 million loan portfolios were current at the end of the 3rd Quarter. This a significant number considering that the both the economy and the labor markets performed poorly in 2010.
Also consider that recent data indicates both the economy and the job markets are improving, making it less likely that homeowners with mortgages will walk away from their homes due to negative equity.
There is a caveat however; the wild card in all of this is falling housing prices. Most economists see continued declining prices in 2011. For example, A. Gary Schilling & Co. has predicted prices may drop by another 20%. Keep in mind a 5% drop in house prices would push another 8 million homes into negative equity and increase the risk of millions of homeowners walking away from their homes and mortgages.
Falling home prices and foreclosure data must be watched carefully in coming months. 2011 could be the year of recovery and opportunity or it could be the year of despair. Obviously the results will affect everyone.