Continued Foreclosures and Falling Home Prices Expected in 2011

A jump in both U.S. foreclosures and home price drops is expected for 2011, according to a new Market Watch report. The good news, however, is that some expect the foreclosure rate to finally peak and begin to drop next year.

Foreclosures and Decrease in Home Price to Jump

In an interview with Market Watch, Rick Sharga, a senior vice president for RealtyTrack (an online marketplace for foreclosure properties) revealed his belief that not only will foreclosures increase in 2011, but home prices will drop even further.

The market is expected to see about 1.2 million bank repossessions by the end of this year. This number is up from 900,000 in 2009. Sharga expects foreclosures to top both numbers in 2011, but thinks that they will actually peak sometime next year and begin to finally drop.

Home price drops are also expected to increase in 2011. A recent report from real estate website Zillow revealed that 2010 is expected to see a $1.7 trillion drop in home values. Unfortunately, the price of homes is expected to drop even further next year, meaning the 22.5 percent of homeowners underwater reported on Monday will likely increase.

Timing is a Big Problem for Foreclosures

The fact that we are expected to see more foreclosures in 2011 has a lot to do with the robo-signing scandal that resulted in a foreclosure freeze. With many servicers unable to complete home repossessions because they were being investigated for fraud, many of the foreclosures that were supposed to occur this year have been pushed to next year.

Housing Market Recovery No Sooner than 2012

In the same Market Watch report, heads of financial services revealed their belief that with foreclosures steadily increasing and home prices continuing to drop next year, the likelihood of a housing market recovery probably won’t be possible until at least 2012.

A recent survey from released by Trulia.com and RealtyTrac last Tuesday revealed a similar sentiment from Americans. Only 10 percent surveyed said they believe the housing market will recover in 2011. Twenty-seven percent said they thought it would recover in 2012, while a whopping 58 percent thought 2013 or later.

It’s hard to say what will happen with the housing market as it seems attempts by from lawmakers haven’t successfully turned things around. It’s possible that the market won’t recover at all, which means we may just have to brace for the worst.