The Foreclosure Crisis Is Not Near Its End

foreclosure-crisis

Experts feel that the foreclosure crisis is not nearing its end. The price of houses throughout 2006 and the early part of 2007 were holding mainly because the sellers did not want to sell. The auction of the foreclosed houses exposed the truth of the plummeting of house prices in many pockets of the country.

The question now on everybody’s lip is whether at last the foreclosure crisis has reached its bottom. Only the auctions would tell the truth.

The chief financial officer of JPMorgan speaking to the New York Times said that his bank and most probably other banks would be under tremendous pressure “home prices stabilize and unemployment peaks.” So long as house prices fall the foreclosures are not likely to abate. This means that the soured assets would continue to plague the account books of banks.

Some pundits however are hopeful that prices are about to stabilize. Even after the fall, of the prices are still 5% more than what it should be. This it seems that the end is nearing.

The auctions however told another story. It is proving to be a great opportunity for many. The manager of one such auction in Washington, Bob Michaelis sporting a shaved head and a goatee addressed the 300 or so that had gathered said that prices were at ‘generational’ low levels. The National Association of Realtors has been broadcasting a commercial over the radio along similar lines. Michaelis said, “Look around to your left and your right, and you’ll see someone who sees an opportunity just like you do. We’re approaching the bottom of the market, I think. We’re approaching the bottom of the market, if we’re not there already.” He explained to the participants of the auction that since the last century house prices have fallen only to return to greater highs. The picture was complete with big banks like Wells Fargo and Countrywide were waiting to advance loans.

The tone of the pep talk was reminiscent of the bubble days when people were similarly lured into buying houses. The idea was being dinned in that the fall is just the beginning of the rise and hence this is the best time to invest in property. Even Countrywide that had to be rescued by Bank of America is singing the same song. But as soon as the auction begins it becomes clear that the old magic was not working anymore.