Despite some reports that suggest the housing crisis may be hitting bottom, foreclosures so far represent the “tip of the iceberg,” real estate analyst, investor and lender Bruce Norris says.
Norris told hundreds of investors attending a seminar he held in Costa Mesa this past weekend that numbers indicating the appearance of firming home prices and fewer foreclosure auctions are “illusions.”
Government repayment and loan modification programs make foreclosure numbers appear lower for now, but are delaying the inevitable inability or disinclination of homeowners in trouble to hang on to property that has dropped in value by hundreds of thousands of dollars, he says.
Meanwhile, he says, redefaults on loan modifications are “sabatoging” government efforts.
Mortgage delinquencies will continue “skyrocketing,” he says, because:
- “The resets of the Option-Arm loans will cause a larger number of foreclosures than the subprime loans.
- “Resets are part of the problem, but a bigger concern is the owners who owe more on their home than it’s worth.
- “Commercial loans and credit card losses will soon add to the problem.”
- Unemployment is a signifcant factor. He says: “I think we will fall back into recession by the end of 2010, and the unemployment rate and underemployment rate will be about 20% in 2011.”
- Owners are finding it more and more acceptable not to make their house payments. The mindset, according to Norris: ” ‘I see my next door neighbor has stopped making his payment, and he just bought a camper.’ You can see that coming. We haven’t really been through the biggest part of the problem.”