Foreclosures Jump as Home Prices Drop

Posted on March 5th, 2008 by Samanta Parks

Home prices dropped dramatically at the tail end of 2007 and bank seizures of homes doubled last month. This indicates that the slump is housing is getting deeper.

The worst housing decline in more than twenty years is going into a third year. The Office of Federal Housing Enterprise Oversight said that the prices of homes are experiencing the largest fourth-quarter drop since 1991. Prices in twenty city areas dropped dramatically in December. Repossessions increased to about ninety percent last month.

Celia Chen, the director of housing economics for Moody’s Economy stated that the housing news is getting very bad. She says that home prices will continue to decline for the remainder of the year because foreclosures will continue to increase and this will increase inventories.

Buyers are finding it harder to get mortgage. There are a large amount of foreclosures and there is an overflow of unsold homes. This year, it is possible that banks will resell about one million properties that have been repossessed. This will force housing prices down even more.

The proposal that president George W. Bush presented to help one million subprime borrowers trying to avoid foreclosure has done very little to stop the increase in default. The interest rate cuts last month have not brought mortgage rates down.

Many applicants are turned down by the state housing agencies because their homes have dropped in value or because they have acquired too much debt. Foreclosure filings increased by fifty-seven percent in January.

Over two hundred thirty three thousand properties were in foreclosure or default in January. There was an eight percent increase in foreclosure filings since December of last year. Over one percent of households in the United States were in a stage of foreclosure during the last year. Prices that are adjusted seasonally for single-family homes fell one percent from three months ago.

Many buyers are locked out of the market since lending standards have tightened up in the past few months. There are no longer any “no-payment down” loans. People are back to being required to put a down payment while trying to acquire a mortgage.

In November of last year the prices of home fell eight percent and this is the biggest decline in twenty years. Patrick Newport, an economist, stated that it is inevitable that home prices will continue to decline in 2008 because there are so many foreclosed homes on the open market.

Borrowers with subprime mortgages and those who could not meet the rising payments on adjustable-rate loans caused foreclosure filings to be driven to the highest rate since last summer. Four hundred and sixty billion dollars worth of adjustable mortgages are going to be reset this year and that will raise the minimum payments for home owners. The drop in home prices have kept homeowners who desire to refinance or sell their homes trapped. They are trapped because they owe a greater amount of money on their homes than the home is actually worth.

The states of California and Florida lead the country in foreclosures. The state of California had fifty-seven thousand properties within the state that were in default and foreclosure. The state of Florida had thirty thousand homes in default and foreclosure in January. This is double the amount of the prior year

Unfortunately, whatever state you live in the foreclosure picture continues to darken.