IT HAS been almost five years since we saw the first signs of a falling housing market. You would think that by this time, the worst is over and that it would be at a point of sustainable recovery. Unfortunately, the outlook for next year 2011 is dim, according to experts. In 2010, we saw very little improvement and this is not likely to change in the coming year.
One economist stated that it may take a minimum of 10 years for home prices to go back to 2006 levels. The problem, of course, is the high number of foreclosures which still continue unabated. As long as foreclosures continue to boost the supply of homes, demand can only grow at a slow pace and this is what dictates home prices. And then, you also have the major obstacle to recovery: unemployment. Currently, the national unemployment rate is nearing 10% (In California, it’s even higher at 12.1%). Unemployment keeps new buyers out of the market. And although mortgage rates are low, tighter lending guidelines by the banks are still making it difficult to purchase a home or refinance an existing mortgage (And what bank would agree to refinance your mortgage, anyway, considering the fact that your home is way “upside down?”)
Sadly, the government’s Home Affordable Modification Program (HAMP) has been a failure. Did you know that out of the 3 million people facing foreclosure who have applied for relief under HAMP since the beginning of 2009, only about 466,000 have been granted a permanent loan modification? But it gets worse: A lot of the homeowners who have been approved still end up in foreclosure anyway because of the fees, interest and late charges that have accrued while they were waiting for approval! Thus, this government program has done very little to help struggling homeowners.
As the year 2010 ends, we are looking at approximately 1.2 million homes that would have ended up in foreclosure (compared to about 900,000 in 2009). The numbers are expected to even be higher in 2011. About 23% of homeowners are now “underwater” on their mortgage. If you are one of these people, welcome to the high-percentage group of homeowners with negative equity. These are the people who are most vulnerable to foreclosure- especially if you have an adjustable rate mortgage (ARM) that has already reset. So, you may be trapped in your current home because (a) you can’t sell it, (b) you can’t refinance your mortgage because no bank will finance you and (c) your current lender has denied your request to modify your loan to make your home more affordable.
I hate to be the bearer of bad news but if you want to know the truth, we are not out of the woods yet. As this year ends, you need to brace yourself for another rough year ahead, according to the experts. If you are facing foreclosure, perhaps you are wondering whether your property is even worth keeping considering the fact that is now worth a lot less than what you paid for it just a few years ago. Should you just let it foreclose, save your money and hope that in a few years, perhaps you can buy another home again? Or should you struggle to keep it no matter what happens, even if you had to hold 2 jobs just to be able to afford the mortgage payments? I wish the answer to this question was simple but unfortunately, it isn’t, because there are several factors to consider in every situation.
The economic downturn has been nothing but brutal for a lot of people. This is definitely not a good time to be in debt. Look for ways to reduce unnecessary expenses and set aside as much as you can for the rainy days. Now is the time to practice good financial discipline and stop accumulating new debt. If you are already overextended, find a way to get out of debt as soon as possible.
In some cases, bankruptcy may be the only way to get a fresh financial start and/or to stop a foreclosure. If you need legal advice, call toll-free 1-(866) 477-7772 to schedule a free consultation. We have offices in Glendale, Cerritos, West Covina and Valencia.
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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray Bulaon has successfully helped over 4,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call Ray Bulaon Law Offices at TOLL FREE 1-866-477-7772.
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