A tsunami of home foreclosures is set to hit the US as banks are unable to keep bailing out tenants that can’t afford their rent and struggling home owners show their anger at the financial crisis by giving up on their mortgage, David Karsbøl, chief economist at Saxo Bank, told CNBC.
“I believe we are about to see a tsunami of foreclosures in the US,” Karsbøl said.
“A lot of homes have been held back because if the banks are foreclosing on them they will have to do a writedown on the mortgages they have on their balance (sheets),” he said. “That’s why they have been reluctant to do so,” he added.
There is also a growing anger in the US population about the bailouts and excessive bonuses on Wall Street, according to Karsbøl.
Meanwhile, “the fact that many homeowners are allowed to stay in their houses without paying on their mortgages begs the question: Why should you pay on your mortgage when your neighbor doesn’t?” Karsbøl said.
Karsbøl added that the notion that unemployment in the US is declining is not true because of a sharp fall in the participation rate.
Karsbøl said that the surge in foreclosures should sideswipe any rally in stocks before long.
- Watch the full interview with David Karsbøl above.
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