Most Americans are probably glad to see 2011 slip into the past, or at least those who own homes are. 2012 may hold the promise of a return to rising home values, something that didn’t happen last year.
In fact, according to Zillow, by the time all the dust clears and the record books are updated, home values across the country are expected to have gone down approximately $700 billion in 2011, which would be 35% less than the $1.1 trillion that was lost in 2010 (http://www.mortgageservicingnews.com/dailybriefing/2010_505/home-values-down-1028057-1.html?site=default_reo).
No one is sure what home prices will do next year, but the signs indicate that if borrowers remain underwater for much longer, it could push them into default. We’re already seeing that on the consumer credit side.
According to the latest report from S&P/Experian, the national composite index for consumer credit defaults increased in November for the third straight month from 2.15% to 2.22%. In addition, the report noted that bank card default rates also rose from 4.85% to 4.91%, indicating continued borrower distress (http://www.mortgageservicingnews.com/msn_features_reo/consumer-credit-default-rates-rise-1028051-1.html?site=default_reo).
It’s clear that American homeowners are watching home values closely and consider falling market values a serious threat. In a recent story, Managing REO’s Evan Nemeroff pointed to a survey in which homeowners said that falling market values are currently a greater threat to them than a fire or a natural disaster (http://www.mortgageservicingnews.com/search/index.html?query=future+home+values&x=0&y=0&zkDo=search&frommonth=01&fromday=03&fromyear=2011&tomonth=01&today=03&toyear=2012).
This tells us that more homeowners are likely to default next year, which means default servicing, REO asset management and field services/property preservation will remain key focus areas for the industry in 2012.
Brian Daily is senior vice president in the strategic alliance group for REO Allegiance, one of the leading national property preservation firms in the U.S. He can be reached at firstname.lastname@example.org.