April 28 (Bloomberg) -- The U.S. housing market won’t recover for three to five years as mounting foreclosures hold down prices, according to mortgage-bond pioneer Lewis Ranieri.
“There’s another big leg down and the question is how long does it stay,” Ranieri, chairman of Ranieri Partners LLC, said during a panel discussion today at the Milken Institute Global Conference in Beverly Hills, California. “You can’t have much of a rally when you’ve got this big overhang.”
Home foreclosures probably will reach a record this year with more than 1 million properties seized by banks, according to data seller RealtyTrac Inc. Unemployment was 9.7 percent in March, unchanged for a third month, according to the Labor Department, and a fifth of mortgaged U.S. homes were worth less than their loans in the fourth quarter, Zillow.com reported.
‘Leave Them Alone’
Larry Mizel, chief executive officer of Denver-based homebuilder MDC Holdings Inc., said the federal government should allow homes to be foreclosed on and sold at reduced prices to new buyers.
“The best thing they can do is leave them alone,” Mizel said during the panel discussion. “We now have affordable housing. The best thing, in my view, is just let the process take care of itself.”
As a result of the housing collapse, many Arizonans have seen their homes lose half of their value. Many owe several hundred thousand dollars more than their homes are worth and are unlikely to dig out of their negative equity hole for decades. To compound the stress and anxiety, when they've called their lender to work out a solution, they've discovered that their lender won't even talk to them about a loan modification or a short sale as long as they are current on their mortgage.