The foreclosure fault line
We’re having a major earthquake drill here in California today, and coincidentally, last night I dreamt I was in an earthquake, so I’m feeling a bit shaky. Thus, the earthquake analogy. Foreclosures are still rippling through the housing market like a solid 6.5. Is the big one still to come?
RealtyTrac reported today that the third quarter was the worst three months of all time for foreclosures. From CNN Money:
During that time, 937,840 homes received a foreclosure letter — whether a default notice, auction notice or bank repossession, the RealtyTrac report said. That means one in every 136 U.S. homes were in foreclosure, which is a 5% increase from the second quarter and a 23% jump over the third quarter of 2008.
Nevada continued to be the worst-hit state with one filing for every 23 households. But even tranquil Vermont, where the foreclosure crisis has barely brushed the housing market, saw foreclosure filings jump nearly 170% compared with the third quarter of 2008.
It’s a mess. RealtyTrac says the fastest growing segment is people who are at least six months late on their mortgages. And it’s likely there are many hidden foreclosures out there. The government’s moratorium on foreclosures earlier this year may have delayed the inevitable for many.
In some markets, lenders aren’t following through on foreclosures. They’re just letting people stay in the homes. In other cases, borrowers are walking away, although those numbers are hard to track:
And because there are so many delinquent borrowers, (RealtyTrac’s Rick) Sharga predicts the banks will be slow to take back their properties and put the repossessed homes back on the market.
“It’s hard to envision [the banks] putting millions on properties up for sale and cratering prices,” he said. “Recovery will be slow and gradual. I don’t see home prices getting much better until 2013.”
The prices at some foreclosure auctions are remarkable. Reuters reported on one in Chicago:
“Any interest in this home at $7,000?” fast-talking auctioneer Renee Jones asked the crowd. “If not, we’ll move on”…
Among the investors was Thomas Smith, 48, who paid $16,000 for a five-bedroom, three-bath home in Englewood, a notoriously violent neighborhood on Chicago’s South Side he called “the murder capital of the world.”
Smith figured another $15,000 in repairs would render the place rentable and said his ideal tenants would be “people…who fell off the ladder a little bit. I’m not trying to make a million dollars or anything.”
This week, the Mortgage Bankers Association said foreclosures wouldn’t peak until late 2010.
What’s that they told us to do for the earthquake drill?
Oh yeah… Drop, cover and hold on.
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