Housing economist Patrick Newport, with Global Insight, predicts two more waves of foreclosures. Neither are expected to be as big as the first and current waves, which are mostly related to bad loans and negative equity. Newport says:
"The next round of foreclosures could come over the next several months as a result of continued job losses in the U.S. In addition to the nearly 660,000 U.S. jobs lost since December, Global Insight is currently forecasting another 600,000 jobs lost over the rest of 2008 and into the first quarter of 2009."
Some of us already know people who have lost jobs, and most of us know people who's work has become very slow.
Newport also predicts a wave in 2010 and 2011 that:
"... will be associated with interest-only loans made between 2005 and 2007, Newport said. In those loans, borrowers only pay the interest for the first five to seven years before they start paying off the principal, at which time their monthly payments increase.
Newport said those loans were one of the innovations that lenders came up with to make it easier for people to borrow, but noted they would mostly make sense for younger home buyers who expect their incomes to rise in the future.
"I think in most cases they were just given to people who shouldn't have gotten loans," he said. "A lot of these homes are going to be deeply underwater when the monthly mortgage payment shoots up (and) there will be a very strong incentive for people to just walk away from their homes."
Foreclosures will be dominating the resale market for a few more years if these predictions are true. However, we seem to be in the thickest part of the crisis right now.
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