2008 Foreclosure Outlook

In 2008 there will be more of the short term fixed rate loans that will convert to adjustable than any year in history. As a result, this is expected to lead to record foreclosure rates.

Areas that have seen growth far beyond what income supports will take the hardest hits. For example, home values in Orange County California doubled for many homeowners between 2000 and 2005. Yet income which averages 4.27% growth rate did not come close to keeping up with that. Many of these areas have already seen 20% pullbacks but more is on the way. Many homeowners who financed 80-100% will find themselves upside down and will be unable top refinance out of these rising payments.

I expect 2008 and to be the worst year in this cyclical downturn. This will be followed by some period of a “flat market” . I would not expect any turn around for at least 2 - 3 years but this will create a perfect opportunity for long term investments in real estate as the bargains will be plentiful.

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