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If You Think Home Prices Are Rising, Think Again

Susan Walsh

I know recent monthly data has everyone thinking that the freefall in home prices is over.

I don't buy it.

I've said it before, and I'll say it now. Until the foreclosure crisis gets better, not worse, home prices will not improve overall.

This today from Lender Processing Services:

The November Mortgage Monitor report, released by Lender Processing Services, Inc. (NYSE: LPS), reveals a nationwide loan deterioration ratio higher than 3:1 - indicating that for every one loan improved, three more loans are deteriorating.

and what's worse:

Foreclosure sales jumped in October, with the rate at 5.6 percent of foreclosures in inventory. The number of foreclosures on the market continues to stall as foreclosure timelines extend. Nearly 30 percent of properties that have been in foreclosure for 12 months have not yet been put on the market for sale - twice the level of the prior year. Foreclosure inventories continued to climb to record levels. October's foreclosure rate stood at 3.14 percent, a month-over-month increase of 0.7 percent and a year-over-year increase of 85.1 percent.

Mark Zandi, of Moody's Economy.com, told Reuters today, "the housing crash is not over." Zandi predicts home prices will not bottom until Fall of 2010, after falling 38 percent from their peak.

Why?

Foreclosures.

"This lull in foreclosure sales has resulted in the price gains in the past few months," he told Reuters. "Foreclosure sales will increase, and home prices will resume their decline by early 2010 as mortgage servicers figure out who will not qualify for a modification."

Questions? Comments? RealtyCheck@cnbc.com

  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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