Economist Warns of Looming REO Inventory

Lots of new real estate owned inventory will be coming into the market during the rest of 2007 and into 2008, and it will be tough to unload them, economist Christopher Thornburg has told attendees at the REOMAC Fall Conference in Hollywood, Fla."Cut the prices on these homes and sell them now, because it will be hard to get them off your books," said Mr. Thornburg, who is a founding partner of Beacon Economics. The peak of adjustable-rate mortgage resets will occur in mid-2008 and there will be a first-quarter recession, he predicted. The credit crisis is not over and real estate prices will fall 20% before the worst is over, Mr. Thornburg said. The commercial sector will be hit next, as the retail and office sector are not looking well. Mr. Thornburg told the crowd that Congress is looking into three bills to change the bankruptcy law and get rid of foreclosures. If these bills are approved, a bankruptcy judge would take control of the borrower's house and other assets and rewrite the borrower's mortgage. Borrowers who took out loans during the last three years would qualify under these laws, he said.