Over the last several weeks numerous sources have reported that the foreclosure situation is bad and expected to get far worse. Even in states like New Hampshire which wasn’t as effected by the real estate boom as say California, it’s expected that 6,000 will face foreclosure this year and potentially more next year.
California is probably the hardest hit state due to the huge number of highly leveraged investor purchases. Foreclosure Listings for California on FreeForeclosureDatabase.com currently number greater than 10,000.
Two questions come to mind:
Have we reached the bottom of the market? If not, how much further down will the market go before we reach the bottom?
What effect will a government bail out have on the real estate market?
My belief is that we’re far from a bottom in real estate. I’ve read several estimates that the market needs to correct 30% or more before we hit bottom. The last report I saw said that prices have only dropped by <6% so far. If that’s correct we are at the very beginning of this corrections and there’s going to be a lot more foreclosure listings before this is all said and done.
Regarding a government bailout… it’s too soon to tell. I think it’s a horrible idea in general. My small government feelings aside, the plan hasn’t been fully revealed so there are a lot of gaps to fill in. It could help provide some support for housing prices, but it will certainly have unintended consequences which will likely only push the reckoning day down the road a little further.