Foreclosures: Plenty to Buy; More Foreclosures to Come

(MoneyWatch)  The Spring housing market is well underway. Only, housing market conditions are resembling the push-pull of weather patterns rather than the strong stream of buying that is normal for this time of year.

In January, we heard that fewer homeowners were paying late on their mortgages. The Mortgage Bankers Association reported that the delinquency rate in the fourth quarter of 2009 had fallen 17 basis points (or nearly 2 percent) from the third quarter, on a seasonally adjusted basis.

On a non-seasonally adjusted basis, delinquencies grew by about half a percent to 10.44 percent of all loans outstanding. The truly bad news is that this number only includes homeowners that are at least one payment late, also known as 30-days late. It doesn't include homes that are in the process of foreclosure, which is another 4.58 percent of all home loans - and rising.

The Mortgage Bankers believes that the reduction in homeowners paying late may be "the beginning of the end" of a historic wave of delinquencies and foreclosures. And, in fact, RealtyTrac reported that the number of foreclosure filings fell 2 percent in February, although they were still up 6 percent from a year earlier.

Is it the beginning of the end? Perhaps. But what kind of a mountain do we have to climb before it's over?

According to an analysis by WashingtonPost.com reporter Renae Merle, "the housing market is facing a swell of homeowners who are seriously delinquent" on their home loans, but have not yet entered the foreclosure process.

Her conclusion: As many as 7 million more homeowners are at risk of losing their homes to foreclosure.

Complicating things is the fact that 60 percent of the foreclosures are happening in 6 states, including California, Arizona, Nevada, Florida, Michigan and Illinois. Georgia isn't too far behind these states.

While properties at the lowest end of the foreclosure ladder are being snapped up by investors with cash to spend, millions more will come on the market over the next couple of years, as banks try to unload inventory.

The real question is what happens to foreclosure projections if unemployment stays high. Right now, true unemployment is running close to 17 percent, but another 20 to 30 percent of Americans have experienced a decline in pay. Half the country has less income to spend, and Americans are still losing jobs.

Sounds to me as though there will be plenty of foreclosures to buy with many more to come.

What do you think?

Read More:

• Foreclosure Coming? Perhaps You Should Bulldoze Your House
• Are You In Loan Modification Hell? Join The Club
• Underwater With Your Mortgage? Citi's Deed-In-Lieu of Foreclosure Offers Borrowers 6 Months Free Rent
• Underwater With Your Mortgage? Maybe You Should Walk Away
• Underwater With Your Mortgage? So Are The Mortgage Bankers
• Underwater With Your Mortgage? So Are A Growing Number Of Homeowners

Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and the upcoming Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com.