A Ray of Optimism in the US Real Estate

A ray of hope seems to be there for the real estate market of US. Although the rate of foreclosure homes have gone up in the month of August, but there is an indication of stabilization in the US housing market. The Fannie Mae and Freddie Mac bailout by the government is supposedly going to strengthen the value of homes. It has been observed that about 656,545 properties or 8.6 of every 1,000 homes in US have been repossessed by the lenders since January, 2008. In the month of August, nearly 102,000 homeowners have fallen into a foreclosure situation. This is almost an increase of 6.0% from the figure in July and 80.0% as compared to the previous year.

It is assumed that nearly 1 million properties will be taken over by the lenders by the end of 2008. About 1.45 million homeowners have confronted with a pre-foreclosure action on their home by the lenders since the beginning of 2008. This is quite alarming as it is almost twice the figure of 2007. Since July this year, the pre-foreclosure activity has somewhat slowed down. However, over half of the pre-foreclosure and lender repossession has taken place in Florida, Arizona, and California. These three states together with Nevada have been heavily hit by the real estate mortgage crisis of US.

Mortgage Bankers Association has reported that nearly 9.0% of the homeowners in US with mortgages were either in a foreclosure situation or behind in their payments at the close of the second quarter. It has been said that California and Florida has been the driving force behind this increasing numbers. The bailout of Fannie Mae and Freddie Mac is expected to have a positive effect. It is hoped that there will be a drop in the borrowing costs. This will provide a support to the secondary market’s demand for mortgage-backed securities and will be a source of money for the lenders.

A decrease in the borrowing costs will make it feasible for the buyers to buy an already-foreclosed home. There has been a major fall in the employment level that has made several economists to assume that there will be further foreclosure problems. According to the Labor Department, a loss of about 84,000 jobs has taken place for nonfarm payrolls in the month of August. The rate of unemployment has rose from 5.7% to 6.1% in August.

The Northeast and Midwest have faced much lesser foreclosures and pre-foreclosures this year as compared to 2007. The Southeast region has the highest number of pre-foreclosure activity going on, with 477,177 or 27.5 filings per 1,000 homes. On the other hand the Southwest region has the highest number of foreclosure activities, with 348,019, or 12.7 filings per 1,000 homes.

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