Real Estate Consultant John Burns is out with something of a doomsday scenario that he claims could occur if there is no further government intervention in the housing market.
The catalyst for Burns' dark vision is a delay in the sales of REO properties held by banks. "For a number of reasons, banks have not been aggressively taking title to homes and selling them, which has resulted in very few distressed sales in comparison to the actual level of distress in the market," Burns wrote in his October U.S. Building Market Intelligence report.
When those houses hit the market, he said he expects home prices to "plummet."
"We have been projecting a 'W' shaped recovery for some time, and we are becoming even more convinced that we are right," Burns added. "It is very clear that price stabilization is temporary unless something is done."
Burns did not profer a particular type of intervention, but he does credit low mortgage rates, support for FHA, Fannie and Freddie and the first-time home buyer tax credit with the stablization that occurred during the past several months.
Based on his analysis of data from the Mortgage Bankers Assn. and Amherst Securities as well as government statistics, Burns surmised that 10% of all homeowners in the U.S. are currently delinquent; almost 7 million homes will be liquidated in 2010 and 2011; and defaults are running at a rate of 300,000 a month, ensuring a continued supply of new properties hitting the market through 2012.
