Moody’s Economy.com has answered the question of weather we will see a decline in foreclosures. Their comprehensive analysis, while including many aspects of the market was partially focused on the foreclosure outlook. Moody’s Economy.com expects a slow increase in jobs beginning in the spring of this year, but real job growth, that which affects unemployment is not expected until next year. Layoffs are halted, but hiring is also dormant. There is also an expectation that people under employed or temporarily employed will slow down unemployment’s retreat. Also on a positive note is the fact that foreclosures share of housing sales is declining from its 2009 peak.
In spite of these otherwise positive factors, foreclosures are expected to continue climbing. This is due to several factors. Strategic defaults are still increasing. Moody’s Economy.com’s definition of a strategic default is when a homeowner can pay his mortgage, but defaults anyway because the mortgage is more than the value of the house. This is also known as being upside down or under water. Strategic defaults continue to increase due to the large number of people who are upside down in their mortgage. There were more than 15,000 homeowners upside down in their mortgage in the last 2 quarters of 2009. Many homeowners become frustrated and tired of struggling to pay high mortgage payments that will never return anything. Another factor is the large number of homeowners that are currently delinquent 90 days or more on their mortgages. In addition to the previous factors loan modifications are expected to decrease, eliminating the only opportunity homeowners have to bring some balance to their payments.
