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Real Estate Foreclosures Forecast to Double

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Message Mike Colpitts

Hammered by the mortgage meltdown the majority of U.S. housing markets are in crisis plagued by an epidemic of foreclosures, which is only certain to worsen over the next few years unless government authorities intervene.

America’s foreclosure crisis is hitting home in the over whelming majority of local housing markets. Housing Predictor forecasts foreclosures will nearly double to top a total of 5.6-million through 2011. The forecast is based on a thorough analysis of all 251 housing markets Housing Predictor tracks on a daily basis.

Creative new adjustable rate mortgages and subprime loans have acted to artificially inflate housing markets in the majority of states throughout the country combined with an epidemic of mortgage fraud.

The crisis has gotten so out of hand that nearly 2-million home owners have already been forced from their homes, and millions more fear losing their properties in foreclosure.

A government economic stimulus package approved by Congress, including increases in government insured lending limits will do little to slow the epidemic, which may affect 1 in 10 home owners. The program fails to address the needs of home owners, who risk losing their homes to foreclosure.

The Federal Reserve has slashed interest rates in an effort to help the ailing U.S. economy, but appears to be counting on solely cutting interest rates as the answer to the foreclosure crisis.

More than 2-million home owners facing interest rate adjustments in the next 17 months face uncertain futures in regards to their homes. Many face the possibility of not being able to refinance their properties as a result of a loss in housing values. Real estate values have dropped as much as 50% in some areas of the nation from the markets peak. Housing deflation has averaged 21% from the peak throughout the country, according to the Housing Predictor study.

From an historical perspective, real estate market indicators run 9 to 18 months ahead of the rest of the national economy. Real estate is intertwined with a large percentage of the overall U.S. economy and is the largest financial asset for the majority of home owners.

The U.S. Savings and Loan Fraud scandal in the late 1980's was the worst financial failure in the nation's history since the Great Depression. Unless emergency action is taken by Congress and the White House soon the foreclosure crisis will clearly become the worst financial disaster in the nation's history.

Congress will need to act soon to stem the tsunami of foreclosures and stop the national economy from falling into a depression. Should Congressional action not be taken in major ways, Housing Predictor analysts forecast that the crisis has a 60% chance of developing into a full scale depression with even a higher number of foreclosures.

It hasn’t been since the 1930’s that the U.S. has had real estate deflation in the terms of a Japanese style meltdown that was experienced from 1992 through 2006. Many real estate experts wonder whether we have just started on a similar path. Rents fell in Japan for 18 years.

It’s old news that America experienced unprecedented booming real estate markets, but all booms go bust sooner or later. Unprecedented times call for unprecedented action. In times of crisis the American public counts on and depends on government to intervene. Whether U.S. lawmakers will do so is a multi-trillion dollar question, which has serious consequences for the nation’s economic future.

More than 175 lenders have already failed as a result of the crisis. Investment manias like the one we have experienced have historically ended in depressions. There have been six depressions since 1837 in the U.S. All have been started by major land buying booms and more people have purchased land either as investments or for speculation since 2000 than ever before.

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Mike Colpitts is the Editor of Housing, an independent web site, which forecasts more than 250 local housing markets in all 50 U.S. states and real estate news. Housing Predictor has a staff of researchers, economists and computer (more...)
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