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Real Estate: Foreclosure Exposure
CNBC.com | December 01, 2011 | 02:34 PM EST

1. Home prices will fall another 5 percent through Q2 before bottoming toward year's end.

Prices are already on a downward trajectory , as foreclosure inventories rise. Banks/mortgage servicers are finally working through a huge backlog of delinquent loans, and as those distressed properties come to market, they will consequently lower home prices. With lower conforming-loan levels, as well as a tight lending environment and the possibility of rising mortgage rates, prices will bottom out in the fall.

2. Foreclosure inventories will rise while new delinquencies remain elevated.

Inventories will continue to rise , as around three million distressed properties progress to final bank repossession. Banks will likely ramp up the process following the usual holiday slowdown, especially given positive rulings on the MERS front (the auto-uber recorder for so many loans), and judicial states lifting their moratoria. Foreclosures will come quickly through the winter and spring months then abate toward year's end. The downward pressure on overall home prices will put more borrowers underwater and in turn keep delinquencies elevated, although not much higher than now.

3. Rents will rise, as will rental occupancy rates.

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