Of all the house loans in America, one out of eleven are in or about to enter the foreclosure net at the end of the first quarter 2008. The number is rising as real estate markets fall and jobs vanish while price of food and fuel increase. The first quarter of this year has been the worst since the last thirty years in American financial history. In 1979 foreclosures had surged high. Since then Mortgage Bankers Association has been keeping records.
Nearly 8.8% of all the house loans are straggling behind amounting to 4.8 million loans. It is an increase of 7.9% from the last quarter of 2007. Only about one third of American house owners are free from mortgage.
The years prior to 2006 had seen record low levels in foreclosure and delinquency. But since then in each quarter the numbers have been astronomically rising. The first lot of erring loans came from the sub-prime ARM category of mortgage loans. But now that the economy has become weak and property value has tumbled even those with better loans are joining the fallen group. There is grave concern that big losses in jobs will further mire the situation in the forthcoming months The Labour Department will soon be releasing its report. A job is understandably the most important factor that can keep a mortgage running.
The foreclosure numbers are worst where there had been the maximum housing activity in the near past and where the local economy is facing inclement weather. The housing industry had largely contributed to the economic boom during those hey days. California and Florida in this respect have set the trend and are primarily accountable for the huge number of foreclosures.
The Midwestern states like Ohio and Michigan are suffering not so much for the previous housing activity but because of lay off. Fortunately during the last few months the numbers of delinquencies have tapered off giving rise to hope. In the five Midwestern states 9.7% of the loans have fallen behind during the first quarter. It is a drop from 10.5% during the previous last quarter of 2007.
Mortgage analyst Michael D. Youngblood comments that “This decade has been brutal on the industrial economies” of the country. The gloom of the labour market is telling on the economy. The highest default rates however continue to be located in Michigan, Ohio and Indiana.