Foreclosures up 32% year-over-year

More bad news for homeowners, foreclosures keep rising:

The foreclosure plague continued to devastate last month.

There were more than 360,000 properties with foreclosure filings — including default notices, scheduled auctions and bank repossessions — an increase of 7% from June and 32% from July 2008, according to RealtyTrac, an online marketer of foreclosed homes. In fact, one in every 355 U.S. homes had at least one filing during July. ...

The jump occurred as several foreclosure moratoriums phased out. They were initiated by many states to give the administration's foreclosure-prevention efforts time to work. But for many help did not come: The modification and refinancing programs have met with less success than hoped.

Where the foreclosures are:

Foreclosures up in February

It appears those announced foreclosure moratoriums didn't help much:

The foreclosure picture suddenly darkened again in February.

More than 74,000 homes were lost to bank repossessions during the month, up from 67,000 in January, according to a regular monthly report from RealtyTrac, the online marketer of foreclosed properties. Nearly 1.2 million have been lost since the foreclosure crisis hit in August 2007.

The number of foreclosure filings rose 6% during the month after falling 10% in January. Worse, filings leaped nearly 30% compared with February 2008. And the results confounded expectations: A downtrend had been expected due to the numerous foreclosure moratoriums in effect during the month.

"We were very surprised," said RealtyTrac spokesman Rick Sharga. "The moratorium were led by big players like Fannie and Freddie and all the major banks. It was supposed to cover the whole waterfront. The fact that foreclosures still went up was a shock."

A particularly troubling aspect of the report was that, for many borrowers, once they go into default, they never get out despite moratorium efforts. That's borne out by comparing bank repossessions — homes actually lost by borrowers — with total foreclosure filings: Nationally, repossessions increased 11% for the month, almost double the 6% rise for filings.

The same holds true for year-over-year figures: February filings jumped 30% compared with last year but repossessions rang up a 60% gain.

The reason so many people lose their homes once they are in default is partially attributed to the severe home price drops recorded in many of the worst-hit areas. When borrowers are severely underwater, owing more than their homes are worth, it removes an incentive to keep up with mortgage payments. Some simply walk away.

More REO auctions

As you've probably seen on TV, Real Estate Disposition Corporation (REDC) is having another auction of bank-owned homes in the Washington, D.C. area. The homes are available for inspection this weekend. They are mostly in the outer suburbs. The auction itself will be held on March 12, 14, & 15. You can request a brochure here.

For readers from places other than the D.C. metro area, the full calendar of auctions throughout the U.S. is here.

Update: It appears that REDC auctions are a scam.

Where the foreclosures are

Click on the map to see a larger image.

More homes underwater; distress sales mounting

Almost a third of all home sales are foreclosures, REOs, and short sales:

Real estate values around the nation have collapsed, and sales of foreclosed and "underwater" homes now dominate many housing markets, according to a report released Tuesday.

The report, from Zillow.com, a real estate Web site, revealed that with foreclosures soaring, nearly 20% of the nation's home sales in 2008 were of bank-repossessed properties. Another 11% were short sales, in which homeowners owed more in mortgage debt than their homes were worth. ...

"As more markets turn down and markets that were already down go deeper, the pace at which value is being erased from the U.S. housing stock is rapidly increasing," said Stan Humphries, Zillow's vice president in charge of data and analytics.

"More value [was] wiped out in the fourth quarter of 2008 than was eliminated in all of 2007," Humphries said.

About $3.3 trillion in home equity was erased in 2008, with $1.4 trillion of that wipeout coming in the fourth quarter alone, according to Humphries. More than $6 trillion in value has been lost since the market peaked in 2005. ...

In the United States, 17.6% of all homes are now underwater, according to Zillow, as are 41.2% of all mortgages for homes bought in the past five years.

MLS underestimates the number of foreclosures

The multiple listing service underestimates the number of foreclosures. This means the MLS also underestimates housing inventory numbers.

There is probably even more excess housing inventory gumming up the market than current statistics indicate, thanks to a wave of foreclosures that has yet to hit the market.

The problem: Many foreclosed homes and other distressed properties that are now owned by banks have yet to be listed for sale. The volume of this so-called 'ghost inventory' could be substantial enough to depress already steeply falling prices when it does go on the market. ...

RealtyTrac, the online marketer of foreclosed properties, recently discovered that it has far more foreclosed properties listed in its database, which the company compiles using courthouse records, than there are listed in the multiple listing services (MLS) maintained by real estate agents. ...

The National Association of Realtors calculates official housing inventory statistics using data from the multiple listing services. By that measure, there were 4.2 million existing homes for sale in November, an 11.2-month supply at the current sales pace, up from a 10.3-month supply in October.

But now it seems quite possible that these figures, which are already at record highs, are underestimating the situation. And if that's the case, it could take much longer for the housing market recovery than analysts currently expect.

Until supply can be brought down to a more normalized level of six to seven months, home prices will continue to come under pressure, according to [National Association of Realtors chief economist Lawrence] Yun.

"It could be a worse problem than we think," he said.

I'd like to commend Lawrence Yun for his honesty on this matter. I have nothing against Lawrence Yun personally, or the organization he works for. What I dislike is dishonesty. When he is honest about the outlook for housing, I will treat him with respect.

August Foreclosures by State

California and Florida have joined forces to bring down the U.S. economy.

Hat tip: News N Economics

The Unnoticed Foreclosure Victims: Renters

MarketWatch reports that homeowners aren't the only people affected by foreclosures. If the foreclosed property is a rental, the renter can often be forced to move on little notice. For low-income renters, this can result in homelessness.

Jeremy Rosen, executive director of the National Policy and Advocacy Council on Homelessness, thinks the effect of foreclosures on low-income renters has been underreported.

"The foreclosure crisis is hitting two groups," Rosen said. "The owners of houses and buildings, and the renters that are occupying them."

The main issue for Rosen pertains to time: Renters can be forced to leave a foreclosed property at a faster pace than a homeowner, who typically gets earlier notice that a crisis is looming. If the renter has limited income, that compounds the problem.

Each state has its own rules concerning tenants' legal rights. This means that some states say tenants have to vacate a foreclosed property within weeks and in some instances, even days. The lack of notice often doesn't give occupants enough time to find an affordable place to live, according to Rosen. For people on a tight budget, this can be devastating, Rosen said.

"There are moving expenses and first month's rent," Rosen said. "Sometimes people just don't have the money for it." ...

The doomsday scenario for low-income renters is homelessness and homeless advocacy groups believe it's a problem that will soon have to be dealt with.

"Foreclosures are driving rental prices up, supply is not keeping up with demand," said Greg White, a policy analyst for the National Low Income Housing Coalition. "You are going to start to see a flood into homeless shelters."

Any thoughts from readers?