Foreclosures to suppress home prices

Former Wells Fargo Senior Vice President and CEO of the Five Star Institute, Ed Delgado, said a new wave of foreclosures predicted to hit the housing market in the fourth quarter of 2011 will likely further suppress home prices, forcing home values to drop. Delgado's prediction is based on analysts expectations of increased foreclosures in the upcoming months, as mortgage lenders start to speed up the default process after a year of reviewing previous foreclosures due to federal and state investigations in their lending practices.

In an interview with Reuters, Delgado said there are currently no signs that the housing market is in recovery, or that it has hit rock bottom yet. Delgado goes so far as to predict the market might not reach its lowest point until the third quarter of 2012. RealtyTrac's latest figures support this claim, as the data forecasts as many as 1 million foreclosure actions to be pushed from the end of 2011 into 2012 due to a back up in the mortgage system.

North Jersey reported that at a recent Mortgage Bankers Association convention, a panel of experts said minor fixes to the housing market could help push a recovery. Mark Zanie, Moody Analytics chief economist, said home prices have increased modestly suggesting an underlying stability in the housing market. Zandi believes implementing policies that reduce the number of distressed sales would incite a dramatic housing recovery in a short period of time.

According to Zandi, the housing market needs to increase home values, stop creating new homes before selling existing inventory and help homeowners avoid foreclosures. To fix these problems Zandi recommends Fannie Mae and Freddie Mac make it easier for homeowners to refinance. Finally, more home loans should be made available to borrowers, as the pool of qualified applicants is very small, the news source reported. 

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