Because of the increase in the number of bad loans nationwide, there could be a steep 20% decrease in home prices in the U.S. – the biggest plunge since the Great Depression.
This was reported by Sree Vidya Bhaktavatsalam and Brian Sullivan at Bloomberg.com.
They quoted Kenneth Heebner, co-founder of Capital Growth Management and manager of the top-performing $1.6 billion CGM Realty Fund which has averaged a 20 percent annual gain in the past 10 years.
Heebner predicts that up to 40 percent of the $10 trillion outstanding mortgages in the U.S. could default because they were given to untested or unreliable borrowers. This would result in in a flood of houses in the real estate market.
In anticipation of having a lot of single-family homes being converted to rentals, Heebner has sold his shares in real estate investment trusts investing in apartments.
This means that if you are in danger of not being able to meet your mortgage payments in the near future, you have to decide and act quickly if you want to sell your house to pay for your loan. If you wait too long, the sale proceeds may not even cover your debt completely.
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