Foreclosures In The Neighborhood Affecting Prices Of Homes

April 1st, 2008

A foreclosure in the near vicinity can affect the value of homes. Even when one’s credit is good, one may still suffer a loss while trying to sell a home or while opting for refinancing. The value of a home is calculated on the basis comparable sales in that locality. Invariably in localities which have witnessed foreclosure, the value comes down quite sharply.

A sick real estate market manages to infect the whole economy, neighborhood by neighborhood and this makes it difficult for the borrowers to draw out cash from their homes. According to experts, if the borrowers are not able provide finance at lesser rates then this could lead to an increase in the number of foreclosures. The states where the inflated prices of homes had dropped most, were Florida, California and Nevada. The appraisers and mortgage brokers from these states say that more and more house owners are stuck in a tight situation.

Since last year, the foreclosure rate in the U.S has made a jump of 57 percent in the month of January. According to the records maintained by Realty Trac, about 230,000 houses were on the verge of foreclosure across the nation. Nevada, California and Florida foreclosures have recorded the highest number of foreclosures. Scattered suburban areas which were greatly popular among people buying homes for the first time, were hardest hit by the foreclosure crisis.

According to Karen Mann, an appraiser from a San Francisco Bay area, there were instances of home buyers in Northern California who had borrowed even 100 percent of the value of their homes as they were unable to afford the homes otherwise. Some of these house owners are now turning their back to mortgages and are giving up the homes to the lenders. Since the markets are on a decline, the appraisers are finding it hard to make calculations based on property sales, which they did during the previous half of the year.

The market has a large number pf properties facing foreclosure and it is difficult to assess what the values of property would be in such a situation. The entire process of appraisal has become much more complex than before. Southern California, being densely populated, is facing problems as well. There have been predictions by consumer groups that the foreclosure crisis would affect the property values and as a result, tax revenues for state and local government would be lowered.