Number Of Sales Less Than Number Of Houses Foreclosed

March 28th, 2008 | Tags: Foreclosure Crisis

This hasn’t happened in decades. There are more houses coming into the shop to be sold than being sold. In 2007 the sale numbers rose by 4.4% but the to-be-sold rate doubled according to figures released by First American CoreLogic. At the end of the previous year about 2% of all the houses kept as security for loans were in foreclosure – this being double the average calculated for the last 28 years. It is the highest rate since 1979 – the year from which Mortgage Bankers Association started keeping data. Lenders opine that this is the worse scenario since the great depression.

The foreclosure concentration has been in Florida, Nevada, Ohio, Michigan and Indiana states according the bankers association. Foreclosures are also dominating the scene in California, Georgia and Arizona. With variations in intensity, foreclosures have become a nationwide problem. Everywhere the rates of foreclosures have risen. Only in Mississippi it was flat but had not gone down. Not all the foreclosures will end up being retaken by the banks because in many instances the owners will try to come to some sort of an agreement. The banks are far from eager about possessing more possessions and are amenable to negotiation wherein the borrower is relieved of extra pressure.

Mark Zandi of Moddy’s has forecast that the two years of 2007 and 2008 will see 3.3 million house mortgage defaults. Of these two thirds will not be able to keep the houses that are their homes. In 2008 in all probability a total of 480,000 will be sold. This is 10% of sales of occupied houses another opinion is that it is likely to be 20%. Zandi apprehends that in the following three years the banks will be able to collect $160 billion from the sale of houses. This is in contrast to what Resolution Trust Corporation collected from sale of real estate during the first half of the 1990’s. The property however was mostly commercial and not residential. Resolution Trust was a body created by Congress in 1989 to sell the assets acquired when the project of savings-and-loans collapsed during the financial crisis.

The net result is a huge credit crunch leading to a precarious financial situation. Ripples are being felt all over the globe. Help is coming from the government and other sources – the latest example being the fate of Bears Stearns.