NEW YORK -- Even as the $26 billion mortgage settlement helps hundreds of thousands of troubled homeowners, it will bring a wave of new foreclosures.
Many lenders held off on reposessing homes during the complex negotiations between 49 state attorneys general, and federal officials.
That's left a backlog of troubled loans, many of which won't be helped by measures in the deal that will let homeowners refinance or reduce the amount of their mortgage.
"The bottom line is that 2012 will see a lot of foreclosures that should have taken place in 2011 and didn't," said Rick Sharga, executive vice president for Carrington Holdings, a real estate finance firm.
Daren Blomquist, vice president of RealtyTrac, online marketer of foreclosed properties, agrees that much of last year's 34 percent drop in foreclosure filings was likely due to the uncertainty involved in the negotiations. He estimates that new filings will climb from 1.9 million in 2011 to between 2.2 million and 2.5 million this year.
"We think what we saw in 2011 was artificially low foreclosure numbers," he said. He added that banks took longer to file foreclosure notices last year, and longer to finish the foreclosure process.
HUD press secretary Derrick Plummer said Thursday's mortgage settlement is designed to make foreclosure the last resort for banks negotiating with homeowners who are seriously delinquent on loans.
Sharga and Blomquist agreed that the mortgage deal will help many homeowners stay in their homes who would have otherwise been forced out. Up to 1 million mortgage holders could see the amount of money they owe reduced.
But the solutions offered by the settlement can only work for homeowners who can afford to make new, lower mortgage payments. Banks will have little choice but to foreclose on those who have stopped paying due to prolonged unemployment or other severe economic distress.
"The settlement really wasn't designed to prevent foreclosure on loans that aren't salvageable," said Sharga.
Millions of Homeowners Remain at Risk
Banks have been letting delinquent loans sit in limbo, but now that a settlement has been reached, banks will likely start contacting delinquent homeowners to see which loans can be salvaged. Sharga says that the banks will likely turn up a raft of new foreclosures.
The five lenders who are parties to the deal -- Bank of America, Citigroup, JPMorgan Chase, Wells Fargo and Ally Financial -- together account for about 60 percent of the mortgage market, Sharga said. And there are many other lenders who were also taking a wait-and-see approach while the big banks held talks, who might soon join the settlement as well.
Sharga and Blomquist said that while the increase in foreclosures will cause plenty of pain in the short term, it's an important part of the recovery process for the housing market, especially the hardest-hit markets.
"The uncertainty has been very bad for the market over the last year," said Blomquist.
There are currently more than 3 million homeowners either seriously delinquent on mortgages or in foreclosure, and that looming inventory has been one of the biggest drags on home sales prices.
"The market needs to clear out a lot of the distressed inventory before prices start to come back," Sharga said.
Mortgage Settlement Will Lead to More Foreclosures, Experts Say
Total population (2010): 1,130,490 Median sales price (Q3 2011): $224,300 % ch. median sales price (Q3 2010-Q3 2011): 7.3% Sales volume (# units sold Nov. 2010-Oct. 2011): 12,156 % ch. sales volume (Nov. 2010-Oct. 2011 vs. Nov. 2009-Oct. 2010): -39.8% Sales per population (Nov. 2010-Oct. 2011): 1 sale per 93 people Unemployment rate (Nov. 2011): 7.8% Foreclosure activity rate (Nov. 2011): 1 in 1,295 units Walk Score: 40
Despite a steep drop in sales, the Raleigh-Cary market saw considerable price appreciation last year, with its median sales price for single-family homes jumping 7.3 percent from third-quarter 2010 to third-quarter 2011.
At $224,300, the Raleigh-Cary metro had the highest median sales price among the 10 markets on this list and was the only market with a median sales price above the U.S. median. Nonetheless, its affordability rate stayed above the national level, with 73.6 percent of its homes affordable to households earning the area's median income, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index.
Total population (2010): 623,061 Median sales price (Q3 2011): $120,900 % ch. median sales price (Q3 2010-Q3 2011): 5.5% Sales volume (# units sold Nov. 2010-Oct. 2011): 9,002 % ch. sales volume (Nov. 2010-Oct. 2011 vs. Nov. 2009-Oct. 2010): -10.8% Sales per population (Nov. 2010-Oct. 2011): 1 sale per 69 people Unemployment rate (Nov. 2011): 7.1% Foreclosure activity rate (Nov. 2011): 1 in 958 units Walk Score: 41
Like Raleigh-Cary and other markets on this list, home prices in the Wichita metro area weathered the housing downturn comparatively unscathed.
"Inventory has been up and sales have slowed, but values have been relatively unaffected," said Mike Grbic, associate broker and owner of Mike Grbic Real Estate Experts -- Select Homes in Wichita.
The Wichita metro's median sales price rose 5.5 percent from third-quarter 2010 to third-quarter 2011, to $120,900. For 2011 as a whole, the city of Wichita posted one of the top 10 year-over-year median sales price hikes nationwide, up 17.2 percent, according to a chart provided for this report by Onboard Informatics.
Total population (2010): 1,054,323 Median sales price (Q3 2011): $123,400 % ch. median sales price (Q3 2010-Q3 2011): 1.4% Sales volume (# units sold Nov. 2010-Oct. 2011): 11,240 % ch. sales volume (Nov. 2010-Oct. 2011 vs. Nov. 2009-Oct. 2010): -18.6% Sales per population (Nov. 2010-Oct. 2011): 1 sale per 94 people Unemployment rate (Nov. 2011): 6.9% Foreclosure activity rate (Nov. 2011): 1 in 4,001 units Walk Score: 63
The Rochester metro area had a 6.9 percent jobless rate in November, compared to an 8.2 percent rate nationwide. The area has seen employment grow 2.8 percent since its fourth-quarter 2009 trough, while employment in the nation as a whole has risen 1.3 percent during that time.
The metro has one of the top 20 fastest job growth rates nationwide, according to Brookings.
Of 100 major metro areas, Rochester is one of only 22 to have regained more than half of the jobs lost between its pre-recession high and post-recession low, the think tank said.
While Rochester has long been associated with the Eastman Kodak Co., the area's economic performance no longer depends on the declining fortunes of that company.
Total population (2010): 569,633 Median sales price (Q3 2011): $157,900 % ch. median sales price (Q3 2010-Q3 2011): 0.8% Sales volume (# units sold Nov. 2010-Oct. 2011): 7,448 % ch. sales volume (Nov. 2010-Oct. 2011 vs. Nov. 2009-Oct. 2010): -25.4% Sales per population (Nov. 2010-Oct. 2011): 1 sale per 76 people Unemployment rate (Nov. 2011): 5.3% Foreclosure activity rate (Nov. 2011): 1 in 863 units Walk Score: 48
The Des Moines-West Des Moines metro area had a 5.3 percent unemployment rate in November -- among the lowest rates in the country. Moody's predicts the area will see a further 2 percent jump in jobs from third-quarter 2011 to third-quarter 2012.
"Strong Midwestern values, a highly educated and productive workforce, and the culmination of many years of cooperation between civic, corporate and government make the greater Des Moines area an attractive city to call home (and an) oasis of prosperity," said Brian Wentz, an agent at Burnett Realty in Clive, a suburb of Des Moines.
"That has attracted and retained top employers and led to many years of sustained growth, with no end in sight."
Total population (2010): 528,143 Median sales price (Q3 2011): $128,700 % ch. median sales price (Q3 2010-Q3 2011): 7.3% Sales volume (# units sold Nov. 2010-Oct. 2011): 6,109 % ch. sales volume (Nov. 2010-Oct. 2011 vs. Nov. 2009-Oct. 2010): -18% Sales per population (Nov. 2010-Oct. 2011): 1 sale per 86 people Unemployment rate (Nov. 2011): 7.5% Foreclosure activity rate (Nov. 2011): 1 in 973 units Walk Score: 37
Located between Nashville, Tenn., and Atlanta, the Chattanooga metro area enjoys a low unemployment rate, high affordability, and the highest rate of out-of-state in-migration among the 10 markets.
The area's median sales price rose 7.3 percent in the year through third-quarter 2011, to $128,700. The vast majority of homes in the area, 81.3 percent, were affordable to median-income households during that quarter.
"One of Chattanooga's largest resident communities, (which) historically had enjoyed 3 to 3.7 percent on an average differential between list and sales price ... increased (to a) 4 to 4.9 percent differential from 2010 to 2011," said Linda Brock, an affiliate broker at Prudential RealtyCenter.com in Chattanooga.