Although foreclosure filings were down for the third month in a row in October, foreclosure filings continue to rise.
Foreclosure rates are up 18% from a year ago, according to CNNmoney.com, but foreclosure filings dropped 1% in August, 4% in September, and 3% in October. Nonetheless, rising unemployment is likely to push foreclosures up to record levels during 2010.
Reuters suggests that by the end of this year, close to 3.5 million families will have received foreclosure notices. This is a 48% rise from last year’s total of 2.3 million. And, according to RealtyTrac, 2011 will not fare much better.
The states with the dubious honor of leading in foreclosure numbers are Florida, with 1 out of every 168 homes, California, with 1 out of every 156 homes, and Nevada with 1 out of 80 homes receiving foreclosure notices. Because Nevada now mandates foreclosure mediation, there were 26% fewer foreclosure actions begun last month. However, that delay does not necessarily mean foreclosure won’t occur, it may just slow down the process.
The national average for foreclosure related activity is 1 out of every 385 homes. While the Treasury Department says that almost 650,000 homeowners – close to 20% - are being aided by modifications from the Home Affordable Mortgage Program, (HAMP) that still leaves almost 3 million more in the lurch. Also, while the program has good intentions, the Associated Press says that permanent status has been granted to only 1,700 of the modifications.
What remains a mystery in the housing market is how many foreclosed homes are sitting in bank inventories and when they are likely to hit the market. If houses are parceled out slowly, and do not create greater disequilibrium in the markets, home prices will have a chance to bottom. However, if banks open the floodgates on foreclosure homes in their inventories, housing prices will plunge even further.
Unfortunately, there is another set of defaults coming up that may stand in the way of a housing recovery. The Wall Street Journal says that $71 billion in interest only loans are due to reset during next year. These resets will result in higher payments and likely defaults for millions of homeowners who are current in their payments at this moment. As these homeowners struggle with unemployment and higher payments, the foreclosure rate is likely to continue uninterrupted.
Despite the increase in foreclosures, home sales continue to increase and prices continue their slow crawl upward. Foreclosures are helping to drive this housing bull market, because what the real estate industry politely calls “distressed homes” accounted for almost 30% of sales last quarter.
Written by Marc Jablon, Realty Associates
marcjablon@yahoo.com / 561 / 213 – 6139
www.marcjablonhomes.com/
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