(ABC News Radio/WLS) -- When will we reach bottom in the housing market? With lenders filing foreclosures more slowly and an excess inventory of homes, housing prices could fall another 20 percent next year, says one economist. Gary Shilling, one of the economists who predicted the subprime mortgage crisis, says the "depressing effect" of two to 2.5 million homes in excess inventory will push prices down.
Foreclosure filings, in which lenders take back homes with delinquent mortgage payments, decreased 30 percent in the first half of 2011 compared to the same period last year. Banks seized 421,212 homes in the first six months of the year, down from 529,633 in the first half of last year, foreclosure listing company, RealtyTrac Inc. said Thursday.
In Illinois, the Governor has announced a plan to spend $100 million taxpayer dollars to give further aid to homeowners who are underwater, with money from the federal 'Hardest Hit Fund.' This program leaves at least one Chicago mortgage profesional asking 'how will they modify a loan of somebody who doesn’t have a job?' and 'what is the state going to do if these people don’t pay their mortgages'?
But questions that began last fall about hastily-signed foreclosure filings, in part, have led to slower approvals. RealtyTrac estimates that 1 million foreclosure-related notices that should have been filed by banks this year will be pushed to next year.
With only 18,000 jobs added in June, the country also has a high unemployment rate at 9.2 percent. Also contributing to a decrease in housing demand is an overleveraged consumer base and home prices that have already seen a double-dip decline, according to the Case-Shiller Index, Shilling said.
"In the past, almost everyone was sure that house prices would never fall, and on a national level, they hadn't since the 1930s," Shilling wrote. "Now everyone knows prices can fall, have collapsed and continue to drop. Who wants to buy an asset that is highly likely to continue dropping in price?"
Shilling said a place to live and a great investment "are no longer contained in the same package," an owner-occupied home. He added the "zeal" to buy the biggest house one can afford is gone and households are seeking smaller abodes.
Steven Leslie, lead analyst with Economist Intelligence Unit's Financial Services Briefing, said he agrees that housing is in a long-term slump.
Leslie said he has "a lot of respect" for Shilling, who is a "big bear on the housing market," but he points out that rent prices have increased. Leslie said rental prices typically have more influence on housing prices than housing inventory.
Copyright 2011 ABC News Radio/WLS Radio
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