6 Million Foreclosures By 2014

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While I think that uncertainty in the economy makes forecasting trends in housing a dubious “science”, I do now and again see a projection that seems probable.  One of the more plausible ones that I’ve read lately is by Andrew Butter.  Butter is Managing Partner of ABMC, an investment advisory firm.  Butter looked at data from RealtyTrac and concluded:

Since the start of 2005 to the end of 2010, three million seven-hundred thousand American families have been kicked out onto the street. At an average of 2.3 people per household that’s 8.5 million Americans who have been directly, physically, affected by the popping of the US Housing Bubble, so far.

I estimate that by the time the “dust” settles on they myriad of personal tragedies that resulted from the misguided policies of the Clinton and more importantly the Bush era, to “promote” (i.e. subsidize) home ownership, six million American families will have been “de-housed” , that’s 14 million personal tragedies.

The last time I looked at [foreclosure trends] was in September 2009 using data up to June 2009.

At that point, after taking into account the dynamics of the foreclosure process, and the backlog that was obvious even then (in 2007 it took an average of 151 days from the 1st notice until the occupants were kicked out, in 2010 it took an average of 400 days), I estimated the cumulative would be six million. One and a half years later, the dynamic is pretty much in line with that forecast, although I reckon the total by end 2016 might reach 6.5 million.

The good news is that it looks like America has passed the half-way mark of that sad process, the bad news is that it looks like it will take at least until 2014 and perhaps a few years after that, for all of the “mal-investments” that were made, particularly in 2006 and 2007 to get “washed-clean”.

I thought the rest of Butter’s article was worth a read, although I differed with him on a couple of points.  One was his “14 million personal tragedies” comment.  Getting out of a place you can’t afford and into a place you can is not a tragedy, it’s a blessing.  It’s only a tragedy when that more affordable housing is on the street somewhere.
I also disagreed with this:

House prices in USA will not return to their “fundamental” until 2016 or so, which means that for anyone with money, now is a great time to buy.

If Butter is correct, wouldn’t that make 2015 a better time to take the plunge?

One thing is certain.  The REOs, for now, just keep on coming.

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