The number of annual foreclosure filings rose from 1.3 million in 2006 to 2.2 million in 2007, to 3.3 million in 2008, and to almost 4.0 million in 2009 (RealtyTrac).
In order to determine whether foreclosure will continue, it is first necessary to determine the causes of these higher foreclosure rates and then to determine whether those causes are continuing. Foreclosures occur because an individual with a mortgage cannot afford the mortgage any longer and because the individual will not recover the amount of the mortgage from the sale of the home. So it is necessary to figure out what might cause individuals to have difficulty affording a mortgage and for the house values to decline below mortgage values.
What might cause a decline in mortgage affordability would be closely related to all macroeconomic measures that affect income. So GDP and the unemployment rate will certainly affect incomes and thus home affordability, since less GDP means less economic activity, which in turn means declining profits and more unemployment. Obviously, lower profits and more unemployment translates into less money for people and thus more people unable to afford their mortgages. In fact there has been an extremely close correlation between unemployment rate and mortgage delinquency. ...Show more