Foreclosure Update: Three More Years Of Pain For Housing

Last Updated Jul 15, 2010 9:03 AM EDT

1 million households are on track to lose their homes this year as the nation continues to dig out of the decade's real estate boom and bust. RealtyTrac reported that while month-over-month and year-over-year foreclosure fillings are decreasing, the nation is on pace to set a record in foreclosure filings (including default notices, auction sales and bank repossessions) this year at 3.2 million. Last year, lenders foreclosed on more than 900,000 homes and the historic average is 100,000 annually.


In the first half of the year, lenders repossessed nearly 528,000 homes and about 1.7 million homeowners got a foreclosure-related warning -- that represents one in 78 American homes. The numbers are startling, but this process is necessary after the massive housing and credit booms. As is the case with manias, the aftermath is messy and painful.

Unfortunately, due to the lengthy process involved in unwinding a bad home investment (versus, say a bad internet stock that takes 5 seconds to sell) the hangover period will persist for some time. RealtyTrac CEO James J. Saccacio said that while the foreclosure problem appears to be improving, we shouldn't be too confident, because "a massive number of distressed properties and underwater loans continues to sit just below the surface, threatening the fragile stability of the housing market."

Housing experts believe that it will take three more years to clear out the overhang of housing. There's a certain symmetry to that notion. From the years between 2000-2006, housing prices nationally doubled and it will likely take the seven years between 2007-2013 to rectify that aberration. Now who said that home prices never drop?

Image by Flickr User TheTruthAbout, CC 2.0
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    Jill Schlesinger, CFP®, is the Emmy-nominated, Business Analyst for CBS News. She covers the economy, markets, investing and anything else with a dollar sign on TV, radio (including her nationally syndicated radio show), the web and her blog, "Jill on Money." Prior to her second career at CBS, Jill spent 14 years as the co-owner and Chief Investment Officer for an independent investment advisory firm. She began her career as a self-employed options trader on the Commodities Exchange of New York, following her graduation from Brown University.

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