Mortgage expert: Foreclosures will hurt housing for 3-5 years

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.

Home prices in 20 U.S. metro areas rose 0.6 percent in February from a year earlier, the first gain since December 2006, according to the S&P/Case-Shiller index. Eleven of the cities showed year-over-year declines, led by a 15 percent drop in Las Vegas and a 6 percent drop in Tampa, Florida.

"These data point to a risk that home prices could decline further before experiencing any sustained gains," David Blitzer, chairman of the S&P index committee, said yesterday. "It is too early to say that the housing market is recovering."

At least 3 million new properties will join 5 million already in a "cloud" of distress in the next 18 months, Ranieri said.

Ranieri, 63, helped turn New York-based Salomon Brothers into Wall Street's most-profitable firm in the 1980s by being one of the first to package mortgages and sell them as securities.