More than 2.3 million American homeowners faced foreclosure proceedings last year, an 81% increase from 2007, with the worst yet to come as consumers grapple with layoffs, shrinking investment portfolios and falling home prices.
Nationwide, more than 860,000 properties were actually repossessed by lenders, more than double the 2007 level, according to RealtyTrac, a foreclosure listing firm based in Irvine, Calif., which compiled the figures.
Moody's Economy.com, a research firm, predicts the number of homes lost to foreclosure is likely to rise by another 18% this year before tapering off slightly through 2011.
There is a bit of good news here:
Foreclosure activity did slow in the fourth quarter overall, declining 4 percent from the third quarter, but jumped nearly 40 percent from the fourth quarter of 2007.
And foreclosure activity last year was up 225 percent from 2006, the year home prices began a deep slump that prevented many homeowners from selling or refinancing.
"State legislation that slowed down the onset of new foreclosure activity clearly had an effect on fourth-quarter numbers overall, but that effect appears to have worn off by December," Saccacio said. "The recent California law, much like its predecessors in Massachusetts and Maryland, appears to have done little more than delay the inevitable foreclosure proceedings for thousands of homeowners."
The bottom line is the economy is creating a ton of stress, which is leading to this problem. And the real problem is underwater mortgages -- mortgages that are worth more than the house. So long as that problem persists the housing market will be in trouble.