Effect of inflation on 12M pending foreclosures

can you please provide a link to the "blind optimism"?

I think the blind optimism comes from people who have, "kept their powered dry", to borrow a metaohor. Their is an increasing number of opportunities for those who were conservative or held excess reserves and hope to help extend the gap between the "rich and poor" even further. Darwinism works both ways.

Their is (sic) should read "there is"

it's interesting how there's been an apparent ramp up in the breadth of speculative RE investors/investing. i won't comment on NYC as it's an anomaly for a number of reasons, but anecdotal evidence such as the "miami" thread and other recent conversations i've had leads me to believe there's possibly a mini-bubble brewing in certain markets as demand is, at least partly, synthetic.

now i'm no economist, so forgive me if i haven't covered all of my bases here, but wouldn't inflationary pressure drive demand for properties in foreclosure as increased market prices would reduce the amount of negative equity that's holding them under water? again, i know this doesn't necessarily apply if interest rates skyrocket, but does that make any sense?

A family who is underwater on their mortgage live on a daily basis and don't make projection over 10 years about the valuation of their house adjusted for inflation. They already see that right now they owe more to the bank than their house is worth and would save big on renting the same property instead. Two years from now, their situation would be much worth as property value will have dropped even more + their monthly expenses in gaz + food will make it even more difficult to pay for their mortgage. Common sense is to walk away now before things get worth. You only need about 25% of those 12Millions underwater to walk away to beat the 2010 numbers of foreclosures.

"You only need about 25% of those 12Millions underwater to walk away to beat the 2010 numbers of foreclosures."

Will another 25% of the 12 million even have a choice?

Inflation is generally good for debtors; I'm not sure why sledgehammer thinks it would contribute to foreclosures. Presumably house prices (and wages) would increase in nominal terms along with inflation; both of these factors would reduce the risk of default for existing mortgages.

jordyn, it's true for those can avoid being foreclosed, but we're talking about home owners who have already received at least 1 foreclosure notice. Wages would not inflate fast enough for them, assuming they are still even employed.

how will wages increase, except in isolated instances and particularly in the short to medium term, when unemployment is still 9% and under is still around 17%?

There's a bunch of things that could lead to more foreclosures (and unemployment is certainly one of them), but I have a hard time seeing inflation as a significant factor. In the short term, inflation is not particularly high, and in the long term it will help debtors.

aboutready: We're just talking about nominal values here; I'm not asserting that there would be real wage increases. Wages increase in nominal terms when there's inflation. I don't think that's a remotely controversial position. This makes it easier to pay off fixed rate debt, and nominal increases in housing prices decrease the number of people who are underwater.

jordyn, there's a lot of slack right now. i don't think it's at all a given that even nominal wages would increase for the majority of earners right now.

I haven't looked at the latest data, but I was under the impression nominal wages were already increasing even given the relatively high unemployment rate at present.

You think workers are getting raises?

Jordin, tell that in the face of a public sector employee underwater who's gonna see his benefits cut, you're gonna end up with a black eye, i'm telling you!

wages went up a penny last month, one of the strongest business-activity months we've had in ages.