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.
But....
"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.
7 comments:
California (one of the states in the center of this Hurricane) passed a law giving some time relief to owners on the brink. This will likely help some and just delay the inevitable for most. Living in California, I am more cautious about drawing conclusions because of the California situation.
A year and a half ago I likened the deflating housing bubble to a group of tethered climbers clinging precariously to a mountain. When the uppermost climber fell (the highest priced house) it would sequentially pull the other climbers off. So it has been. As house prices have fallen more go underwater. Those markets that were the furthest away from the houses' underlying rental values or values as shelters will fall the most.
A few months ago I noticed a point of inflection in the downward slope of house prices to a slower rate of decline. I projected that it could have been the beginning of the stabilization in prices. Since that time a second inflection point appeared but this time the rate of decline has accelerated. This is unfortunate for two reasons. The first is obviously prices are still falling. The second is that with the rapidly falling overall economy the bottom is getting lower. The situation is truly going from bad to worse.
More than the mortgages are under water. I know two people who live across the street from homes that were abandoned and are in foreclosure. Of course, the power was turned off long ago. The homes have finished basements, with sump pumps, and ended up with flooded basements sitting for months. Mold everywhere. They are now tagged uninhabitable. One home had the cleaning crew show up, the guys went in, came out puking and then they donned the moon suits and went to work. This is in a newer subdivision of $300-$400K homes.
Real Estate agents tell me about vandalism done by people before they move out. Black paint on hardwood floors. Holes in the walls. Wonderful stuff.
I guess it will provide work for tradesmen eventually, when somebody comes up with the cash to make the repairs.
What a world.
olephart said:
"A few months ago I noticed a point of inflection in the downward slope of house prices to a slower rate of decline. I projected that it could have been the beginning of the stabilization in prices. Since that time a second inflection point appeared but this time the rate of decline has accelerated."
The government has intervened, and pushed foreclosures forward something like three months. Is that roughly the size of the gap?
Natetg,
Check the Case Shiller index for December. It shows that in 2008, the rate of decline slowed in middle of the year and resumed a more rapid decline in the fall.
http://globaleconomicanalysis.blogspot.com/2008/12/case-shiller-and-car-analysis-december.html
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