Are foreclosures dragging home prices down? According to most economist the answer is a definitive YES. Economist, Mark Zandi predicts with growing unemployment, home prices will likely continue to fall another 10% in the next 12 months. By his estimates another 2 million homes will be in foreclosure in 2011.

Currently about 2 million single family homes are in foreclosure or REO.  Talk about transfer of wealth. The El Paso - Fort Bliss area has not been exempt for the foreclosure story. But not because of unemployment as Zandi predicts will continue to contribute to the increase of bank-owned properties. No, it is predatory lending practices that prevailed during the 2005 - 2006 housing boom. Making homes affordable for people with enuse credit or transitory employment was a huge mistake for El Paso. Unfortunately, the only one left holding the bag was the home owner.  The silver lining, if you can call it that, in El Paso is that for the first time since labor records have been recorded here, unemployment is lagging behind the national rate of 10.2%.

Zandi predicts a one point increase mortgage rates will increase after the first quarter of this year as government programs like First time home buyers tax credit expire. Although other economist predict a sharper increase in mortgage rate well above 30Y  Tbills.

Download the pdf to see the housing picture for 2010 provided by Economy.com. As you will notice some states will fare better than others. According to Zandi we are nearing the end of the housing crash.