One would think that with mortgage interest rates at almost historical lows, the real estate market might be booming. Certainly the fact that prices in many markets have dropped substantially, in many cases 50% or more, would cause one to guess that the real estate business should be humming. In fact, for people who have good jobs and who have confidence that their employment will not abruptly be terminated, this is certainly a once in a lifetime opportunity to buy a home or to invest in real estate.




But the real estate market is not booming. To the contrary it is in the doldrums, and it is likely to remain that way throughout 2011 and into next year. There are a number of reasons for this, including the number of foreclosures on the market, and the lack of job growth and more importantly, how secure people feel in their jobs, even if they are employed.



The fact of the matter is that about 5,000,000 mortgages are two months or more in arrears. And many other homes that were financed with flimsy loan requirements and adjustable mortgages will see their payments increase in 2011 and will not be able to meet the higher payment levels. A large number of these homes will receive foreclosure filings in 2011, and many of these people will lose their houses.



Predictions for the number of foreclosures expected in 2011 are even higher than the number that occurred in 2010, and that number was about one million. The latest forecasts for 2011 have been cited as 1.2 million. Since selling these foreclosed homes takes a long time for various reasons, the real estate market will continue to struggle until normal levels of foreclosures and unsold inventory reach normal levels.



There are risks for purchasers of foreclosed properties, and dealing with these tends to slow down the resale process. For one thing many foreclosed homes are in various states of disrepair, and potential buyers need to understand what they are buying and have a lot of inspections done. In addition, there have been administrative mishaps that have occurred, like the infamous robo-signers, that have slowed down the process and even stopped it for a time.



For real estate activity to return to anything like normal levels, the excessive number of foreclosed homes and large numbers of unsold inventory will have to come down substantially. This will certainly not happen until at least 2012 and will probably extend for a time into that year.

More Information:

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