Foreclosures running at 2 million per year

I'm sitting watching Bloomberg this morning and they had a Boston Economist (Zuckerman?) saying we're heading towards a perfect storm.

Per CalculatedRisk (Great Blog, if you're not reading it, why?) new home sales are below a SAAR of 600,000 homes per year. In other words, foreclosures will add more homes onto the market than new build.

Also, think about how many rental units were removed from the market in the last seven years due to condo conversions. Over the next two years the vast majority of those units will re-enter the market. New build condos will also enter the market. In some areas, like Phoenix, this has already broken the rental market. In other areas, e.g., DC, its going to create a three year deflation on rents.

January sales show a SAAR of existing home sales of 4.89 million. I doubt that rate will be maintained. Most likely existing home sales will be below 4.5 million. Most likely the foreclosure rate will increase too. What happens to home prices when foreclosures are half to 2/3rds of the market?

If you are a buyer, realize that 2009 should bring down prices in the "elite markets" more than 2008. The power is in the buyers hands. Remember, as a buyer, you have the money that everyone else wants. No one is entitled to your money. Get the most for it.

Got Popcorn?
Neil