Experts: Foreclosures Will Push Home Prices Down

Tuesday, 16 Feb 2010 03:40 PM
By: Dan Weil

Two new studies say the tsunami of home foreclosures will continue to surge, meaning home prices will keep falling in troubled areas.

And both studies, conducted by Standard & Poor’s and John Burns Real Estate Consulting, say most government efforts to ease the terms of troubled mortgages will merely delay rather than prevent further foreclosures, The Wall Street Journal reports.

John Burns figures that 5 million more homes will enter foreclosure or related proceedings over the next few years.

That accounts for 65 percent of the estimated 7.7 million homeowners who are now delinquent on their mortgage payments.

Arizona, California, Florida and Nevada represent the epicenter of the crisis.

According to the S&P study, the "overhang" of foreclosed homes expected to go on the market will put downward pressure on home prices.

Loan modifications are allowing some homeowners to make progress on their mortgage payments, but S&P estimates that 70 percent of such borrowers will ultimately default again.

Loan modifications "may be helping marginally, but they are not going to solve the whole problem," Diane Westerback, a managing director at S&P, told the Journal.

Housing guru Robert Shiller also says home prices are likely to fall further.

“I think it’s . . . better than a 50-50 chance that we’re going to see declines,â€