Housing prices have stabilized and are actually slightly increasing in some areas. The tax breaks passed by Congress have encouraged more first-time home buyers to get into the market. So is the U.S. housing crisis over? Will the real estate market be back to normal in no time? Well, if you listen to many of the talking heads on the news channels, you might be tempted to think that the worst of the housing crisis is behind us and that we are headed towards recovery. But that is not what is happening. The truth is that we are just now getting ready for round 2 of the real estate nightmare.
Where is the evidence to back that assertion up? Well, just consider the chart below. The delinquency rate on U.S. residential mortgages continues to explode at an exponential rate….
Please note that the rate of mortgage delinquencies is now much, much higher than it was when the housing market was crashing so hard in 2007 and 2008. More people than ever are falling seriously behind on their mortgages, and that means that more homes than ever are in danger of being foreclosed.
Now it is true that there are some signs that the rate of serious mortgage delinquencies is starting to stabilize, but the reality is that we will experience only a momentary pause.
Why?
A massive second wave of adjustable rate mortgages is scheduled to reset beginning this year, and if it goes anything like the “first wave” did, the results could be absolutely catastrophic for the U.S. economy. Just check out the chart below….
This coming second wave could result in another huge mountain of foreclosures being forced on to the market.
So is the housing crisis over?
No.
Not even close.
Unless something really dramatic happens, the U.S. housing market is going to experience pain so intense that it is hard to even imagine. Millions more Americans could lose their homes and scores of banks could end up being shut down.
Let’s hope that things end up being not quite as bad as it looks like they could be.
But you know what they say: “Hope for the best but prepare for the worst”.
