Last Updated Nov 12, 2009 7:47 AM EST
For the third month in a row, the number of foreclosures decreased slightly.
Is the tide of foreclosures turning? Not really. It's more like a temporary lull.
In a press release, James J. Saccacio, chief executive officer of RealtyTrac noted that three consecutive monthly declines is unprecedented since the report began and acknowledged that it might seem like the "foreclosure tide may be turning. However, the fundamental forces driving foreclosure activity in this housing downturn -- high-risk mortgages, negative equity, and unemployment -- continue to loom over any nascent recovery. And despite all the efforts and resources directed at helping homeowners avoid foreclosure, we continue to see foreclosure activity levels that are substantially higher than a year ago in most states."
According to the latest foreclosure figures from RealtyTrac, the Irvine, Calif.-based foreclosure information service, as many as 3.4 million homes will fall into foreclosure in 2009, a 48 percent spike from 2008.
If we're at 3.4 million foreclosures in 2009, and Sharga and Saccacio expect "record" numbers in 2010 and 2011, it's easy to see how foreclosure experts feel comfortable predicting a frightening 7 million foreclosures by the end of 2011.
There are ways the number of expected foreclosures could rise even beyond 7 million:
- Unemployment could continue to rise. While the official unemployment rate of 10.2 percent is beyond where many economists thought the U.S. would be at this point in time, it's only expected to go up from here, at least through the middle of 2010. Rising unemployment - or even unemployment that stabilizes around 10 percent - means millions of homeowners won't be able to afford their mortgage payments.
- Loan modifications could fail. Lenders have modified hundreds of thousands of mortgages (around 650,000 loan modifications have been done, according to the latest count) under the Making Home Affordable Act. But those loan modifications are temporary and may ultimately not become permanent. Those that aren't permanently modified will eventually fall into foreclosure or be sold as short sales.
- The impending commercial real estate crisis could hit harder than expected. When commercial real estate loans fail, developers often go into bankruptcy. If they have personally guaranteed the loans, they'll be broke - or have much less income than before. Not only will they be at risk for foreclosure, but the owners of the ancillary businesses that depend on the commercial real estate market will be at risk, too, including commercial real estate brokers, agents, appraisers, inspectors, bankers, lawyers, etc.