Housing Market Continues To Be Hurt By Increasing Foreclosures

February 26th, 2008

An increasing number of home sales are attributed to foreclosures, more so in areas that are affected the most in this real estate crisis. According to data from the Associated Press, comparison of 2007 foreclosure data shows that there is more pressure for dipping house prices not only in areas of Colorado, Michigan, Nevada and Tennessee but also in Arizona, Florida, Georgia and Ohio. In fact, 50 percent of home sales are from foreclosures in some parts of California. In addition, rate of sales in Nevada at 17.5 percent is four times that of 2006.

According to real estate experts, this growing rate of foreclosures is worsening conditions in weaker markets and having many cascading effects. Even those owners who are not under deadline pressures are foreclosing their properties. In effect, banks are under increased pressure to off load their burgeoning inventory of foreclosed properties at low prices prolonging the housing crisis. According to RealtyTrac, average price has dropped by $1000 for a foreclosure sale nationwide. This means that properties are losing value and local tax collections are further reducing. These effects are enhanced more in neighborhoods of minorities, as lending standards are the weakest for the residents here.

Many investors and real estate brokers feel that the situation is much larger than it is made out to be. Bush’s administration and top lending banks of the country have devised some sort of a relief measure where heavily indebted defaulters are given a 30-day break, for in the meantime, lenders would devise a new plan to make more affordable mortgages.

A comparison of the third quarter results (2006 Vs 2007) made by Associate Press on the annual rate of home sales nation wide data showed an increase up to 4.7 per cent vs. 3.3 percent in 2006.

The data shows that areas where lending standards were the weakest are the hardest hit. Places like Kansas, Maine and New Mexico have very low shares of foreclosure contributing to home sales at just 2 percent of total sales. Lax lending standards in prime areas have added fuel to this crisis.

National Association of Realtors is conducting an informal survey to get more detailed information to gauge the depth of this issue.

Though many experts feel that data findings do not cover foreclosure sales through auctions, the fact remains that Foreclosures are on an increase and authorities will need to put in a lot of checks and measures to bring stability in the Real Estate Housing Market.