Foreclosures Hampering Economic Pick Up

June 17th, 2008 | Tags: Foreclosures

The outlook is bleak for the economy of the country – increasing foreclosures are hampering the economic pick up pace. One out of every 483 houses across the country is in foreclosure. With many being at risk and others struggling to get a foothold on life, the economic recovery might well be delayed – much longer than previously anticipated.

May was a particularly tough month – the third consecutive month that saw a month-to-month increase in foreclosures and the 29th running month that witnessed a year-over-year jump. This report was released by ReatlyTrac in a statement issued by its chief executive officer, James J. Saccacio. The foreclosure of houses in May increased by 7% from what it was in April of this year. It is a high jump of 48% in year-over-year calculations with the 261,255 foreclosure postings. These figures are according to RealtyTrack’s US Foreclosure Market Report. The report is inclusive of all the houses that are in any stage of foreclosure – default, delinquency, court auction and or bank repossession.

Nevada had the dubious distinction of ranking first in the national foreclosure race. California, Arizona and Florida are close runners up. These areas saw the most frenetic activity during the housing boom period extending for five years from 2000 to 2005.

Devin Reiss of Realty 500 Reiss Corporation, of Las Vegas said to Bloomberg News that the market is definitely different to what had they had “got used to” a few years ago. The real estate market is choc-a-bloc with houses sitting on the shop shelves asking to be sold. More are rushing in. There is no doubt that market woes will be escalated with the onrush of these staggering numbers. Reiss added, “50% of our sales are foreclosures.”

About 300% of the house sales in the country will come from foreclosures this year. 1.2 million foreclosed single-family units are poised to enter the market. In a recent report, Michelle Meyer and Ethan Harris, economists attached to Lehman Brothers Holding Inc or LEH, reported in New York that it is feared that the foreclosed houses will sell for 20% less than other units. This will pull down the real estate market nationally by 6%.

The consumers of USA are already badly battered with high increases in gas and food prices. The loss of the house will be like adding insult to injury. The delay in the recovery of the general economy seems inevitable.