U.S. Foreclosure Market: Current Status

According to RealtyTrac’s recent report, U.S. foreclosures declined 10 percent in January 2010 compared to December 2009. However, foreclosures are still up 15% compared to the same time last year. RealtyTrac reported the following states as having the highest numbers of foreclosures: 

1. Nevada
2. Arizona
3. California
4. Florida
5. Utah
6. Idaho
7. Michigan
8. Illinois
9. Oregon
10. Georgia

It was reported that 60% of all foreclosures are from California, Florida, Arizona, Illinois and Michigan. Not surprising.  We are not out of the woods yet.

Foreclosures Affecting Luxury Home Market Too

Foreclosures are affecting the luxury home market too. Many luxury homes are being sold at foreclosure auctions as well. RealtyTrac reported that in 2009, 18,817 properties with a price tag of at least $1 million faced foreclosure. That was a 162% increase from 2008. Since 2007, luxury home prices of $1 million plus are down approximately 25%. Many homeowners who need to sell and cannot find buyers are choosing real estate auctions before their properties end up going to foreclosure.    

Citigroup Trying New Approach to Prevent Damage to Foreclosure Homes

In an effort to prevent borrowers from destroying foreclosed homes prior to being evicted, Citgroup announced recently that is allowing delinquent borrowers who don’t qualify for federal aid to stay in their homes for six months after their home is foreclosed upon, providing they turn over the keys to the bank and leave the home in good condition. Many angry homeowners strip and destroyed their homes prior to vacating, and it has caused major expenses for lenders like Citigroup and others.

According to Citigroup, approximately 20,000 homeowners in high foreclosure rate states including Michigan, Ohio, Florida, Illinois, Texas, and New Jersey may be eligible. It will help borrowers save money to move and save Citigroup money on repairs. Also, Citigroup will be able to have more control over their inventory of foreclosure homes and time to decide when they want to put the homes on the market for resale. This way not as many foreclosure properties end up flooding the market and driving home prices further down in their areas. This could end up being a model for other lenders as well if the program works.

Government Intervention

According to the National Association of Realtors, short sales make up about 10 percent of sales nationally.  Short sales have become popular alternatives for both lenders and upside down homeowners because short sales avoid the foreclosure process and save everyone time and money.  However, the biggest obstacle facing short sales is that they have been taking so long to get approved by lenders that many buyers get frustrated and the deals fall apart. The government is hoping with the release of its new Home Affordable Foreclosure Alternatives Program (HAFA), part of the Home Affordable Modification Program (HAMP), that more lenders and loan servicers as well as homeowners will participate in the program.

For lenders and loan services as well as homeowners that complete a successful short sale transaction, the government will provide financial incentives to the parties. Lenders and loan servicers may receive up to $1,000 and homeowners up to $1,500 for relocation costs. The government hopes these incentives will speed up the short sale process and help prevent more homes from going to foreclosure.  

Economy

Economist, Lawrence Yun of the National Association of Realtors, recently predicted that with the government hiring about a million people to help with the 2010 Census our unemployment rate will drop this Spring, even though these jobs are only temporary. With more people working, hopefully it will help boost the economy which in turn can help save more homes from going to foreclosure as well. Time will tell.

It is hard to determine when there will be a significant drop in the national foreclosure rate, but it is hoped that home prices will level off the second half of the year depending on unemployment numbers, interest rates and other economic factors.

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