Housing market is fore-closing in on record highs
The cause-and-effect relationship with the U.S. real estate market actually has a lot of effects. The current status of the market has led to less mortgage originations and more rental applications.
Perhaps the most profound effect of the current market is that high interest rates and an increasing lowering of affordability has lead foreclosures to spring up in virtually every neighborhood.
The October 11, 2006 article, “National foreclosures remain high” posted on Inman News, explains how these foreclosures are affecting certain areas of the country more than others.
“The number of residential properties entering some stage of foreclosure during September was 112,210, down 1 percent from the previous month, and up 63 percent from September 2005, according to foreclosure tracking service RealtyTrac.”
There is one foreclosure filed for every 1,030 households. According to RealtyTrac, September marked the second consecutive month in which over 110,000 new foreclosures were filed nationwide.
“Foreclosure filings are up 39 percent year to date and have already surpassed the total number reported in all of 2005. If they continue at the current pace, foreclosures will exceed the 1.2 million mark by the end of the year.”
The top foreclosure rates were reported in Michigan, Colorado and Nevada. Michigan’s housing market is falling on tough times as sales have hit record lows as prices have not yet reflected the market decline. “A total of 7,846 properties entered some stage of foreclosure in Michigan in September, a 14 percent increase from the previous month and nearly three times the number reported in September 2005. With one new foreclosure filing for every 538 households, Michigan’s foreclosure rate replaced Florida's foreclosure rate among the nation's top three.”
Nevada’s foreclosure rate does not come as a shock as its dominant city (Las Vegas) experienced the highest inflated growth from 2001-2005. Prices are still teetering on a cliff that is much higher than affordability would allow. Combine low affordability with high interest rates and you have a perfect formula for foreclosure.
But Michigan, Colorado and Nevada are not the only states experiencing extraordinarily high foreclosure rates. The other seven states rounding out the nation’s top 10 are Florida, Georgia, Indiana, Illinois, Texas, Ohio and Utah. And not to be forgotten is California which saw a 19 percent foreclosure increase with 14,806 properties enduring some stage of the process last month. California’s foreclosure activity has risen more than 40 percent over the last two months.
Foreclosures are bad for the economy because they represent that homes are unaffordable. Sales are drastically down across the nation, which will eventually lead to lower prices so that people can by homes in their price range and not have to worry about defaulting on payment.
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