Thursday, October 23, 2008

US Foreclosures Up 71%

Source : The Straits Times, Oct 23, 2008

WASHINGTON - THE number of American homeowners ensnared in the foreclosure crisis grew by more than 70 per cent in the third quarter of this year compared with the same period in 2007, according to data released on Thursday.

Nationwide, nearly 766,000 homes received at least one foreclosure-related notice from Jul through Sept, up 71 percent from a year earlier. -- PHOTO: AFP

Nationwide, nearly 766,000 homes received at least one foreclosure-related notice from Jul through Sept, up 71 percent from a year earlier, said foreclosure listing service RealtyTrac Inc.

By the end of the year, RealtyTrac expects more than a million bank-owned properties to have piled up on the market, representing around a third of all properties for sale in the US.

That's bad news for anyone who lives nearby and wants to sell their home. While foreclosure sales are booming in many areas, those properties are commanding deep discounts and pulling down neighboring property values.

'It has a pretty significant impact in terms of pricing,' said Mr Rick Sharga, RealtyTrac's vice president for marketing.

RealtyTrac monitors default notices, auction sale notices and bank repossessions. More than 250,000 properties were repossessed by lenders nationwide in the third quarter, 81,000 of which were taken back last month.

Six states - California, Florida, Arizona, Ohio, Michigan and Nevada - accounted for more than 60 per cent of all foreclosure activity in the quarter, with California alone making up more than a quarter of all US foreclosure filings.

Detroit and Atlanta were the only cities outside California, Florida, Nevada and Arizona to make RealtyTrac's list of the 20 hardest-hit metropolitan areas.

The combination of sinking home values, tighter mortgage lending criteria and an economy that many economists think has already slipped into recession has left hundreds of thousands of homeowners with few options.

Many can't find buyers or owe more than their home is worth and can't refinance into an affordable loan, with the global credit crisis making loans far less available.

For those who can qualify for a loan, or have cash to invest, there are bargains to be had, especially in ravaged markets like Nevada and California.

Last month, foreclosure resales accounted for more than half of existing home sales in California last month, as home sales jumped 65 per cent from a year ago, while the statewide median home price fell 34 per cent to $283,000, according to MDA DataQuick.

RealtyTrac, however, reported foreclosure filings in Sept were actually down 12 per cent from Aug. But much of that decline was the result of new state laws that delay the foreclosure process.

In California, for example, lenders are now required to contact borrowers at least 30 days before filing a default notice. A similar law in North Carolina gives borrowers an extra 45 days.

Still, that's not likely to be enough to save homeowners who owe more on their mortgages than their homes are worth. Nearly 12 million of the 52 million Americans with a mortgage - that's 23 per cent of them - are in that position, according to Moody's

It remains to be seen how much the government's intervention will stem the housing crisis.

Earlier this month, the Federal Housing Administration launched a program that aims to prevent foreclosures by allowing homeowners to swap their mortgages for more affordable loans, but only if their lender agrees to take a loss on the initial loan. The bill is projected to help about 400,000 households. -- AP

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