Latest Foreclosure Figures Echo Dire Predictions

Posted on December 3rd, 2007 by saman

Not unexpectedly, the latest figures from RealtyTrac, the Irvine, California-based clearing house for foreclosure data, demonstrate that October foreclosure filings continued their rise as hundreds of thousands of American homeowners struggled with unaffordable monthly payments. RealtyTrac said the increase in foreclosures was 2% in October, representing nearly 225,000 new filings, a 94% increase over October 2006.

Foreclosure activity still remains highest in just a few states that have suffered the most in the current housing crisis including California, Nevada, and Florida. Other states that are in the top ten of mortgage foreclosures include Michigan, Ohio, Georgia, Colorado, Arizona, Illinois and Indiana.

The one bright note among the latest statistics is that mortgage default notices which precede foreclosure filings were down almost 9% for the month, which may indicate that a meaningful number of homeowners have found ways to avoid the foreclosure process, at least for now. On the other hand, October bank repossessions increased by 35%, one indication that more homeowners who start into the foreclosure process are losing their homes. While some critics have accused RealtyTrac’s data of being overstated, the company says that since foreclosure filings only occur once in a given month, it does provide an accurate picture. At the present, there is no federal clearinghouse for foreclosure information. It is reported by states from data supplied by their counties.

In reality, reported foreclosures may really understate the number of people who are losing their homes due to inability to pay each month. This is true because some resolutions of defaults, such as short sales, are not reflected in statistics. A short sale takes place when the lender approves a sale of the home for less than the mortgage balance owed, which in turn allows the homeowner to avoid foreclosure.

The dire predictions about foreclosures are further confirmed by Foreclosures.com, a website that collects foreclosure information. Their figures show that in October, initial filings were up 11% from September’s figures and nearly 100% greater than the same period in 2006.

Unless the fed steps in with a real solution, there isn’t much more that can help. Many ideas have been suggested and some seem workable. None, however, are taken as happy news by lenders. Roughly $1.5-trillion in adjustable rate mortgages (ARMs) are scheduled for interest-rate rests between now and the end of 2009, according to figures from Credit Suisse. Resets upward from initial “teaser” rates generally occur when ARMs have been in effect for two or three years. At that time monthly payments make a dramatic increase that place them out-of-reach to many homeowners. All these foreclosures add to the total of unsold homes on the market, which is already glutted with them. As a result, housing values are declining and the sale of existing homes has dropped for the eighth consecutive month in 2007.

Sales of existing single-family residences and condos went down by 1.2% and the median price of a home declined to just under $208,000 which represents a drop of 5.1% from last year’s median price. That is the largest year-after-year price decline ever recorded.