Foreclosures Won't End Soon, Analysts Predict

Rising unemployment and falling home prices is a treacherous combination that is dragging people with excellent credit into the foreclosure morass.

The jobless rate of 4.4 percent in April of people with bachelor’s degrees isn’t high compared with the overall unemployment rate, but it is more than double what it was a year ago.

Foreclosures are unlikely to peak until 2011, says David Crowe, chief economist of the National Association of Home Builders. He says foreclosures typically hit a high after unemployment does, and he believes the employment situation won’t turn around until late this year. Then rising employment will drive up interest rates, he fears, causing more resets of adjustable rate mortgages, leading to more foreclosures.

Credit Suisse echoes Crowe’s concerns, predicting that scheduled resets will hit a high in 2010 and rates will stay high until 2012.

Source: Business Week, Peter Coy (06/15/2009)