Foreclosure wave isn’t going away soon
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Kai Ryssdal: If you’re still celebrating the Dow Industrials reaching 10,000 yesterday, here’s a little hangover for you. Guess what else is going up? Foreclosures. Over the last three months banks have filed papers on nearly a million homes. That’s up almost 25 percent over last year. And they’re spreading to more middle-class and upper-income neighborhoods. Curt Nickisch reports from WBUR in Boston.
Curt Nickisch: Foreclosure auctions are now hitting the affluent suburbs of Boston. Two weeks ago, a bank foreclosed on this single family colonial with a white picket fence.
AUCTIONEER: Going once, hearing no further advance over $365,000 going twice, hearing no further advance, satisfied?
The reason for these spreading foreclosure auctions is not those crazy interest rate mortgages. It’s the recession. Nowadays, people are losing their homes the way they used to before the subprime crisis.
NICOLAS RETSINAS: Historically, people lost their home when they lost their job, they lost their health, or they lost their spouse.
Job losses are to blame again now, according to Nicolas Retsinas, a housing economist at Harvard. After a while, even middle-class and upper-income households run out of savings and can no longer make their payments. The consulting firm RealtyTrac says out of every 136 homes across the country, one is in foreclosure.
WHITNEY TILSON: The number of distressed homes coming through the pipeline has actually never been greater than right now.
That’s mutual fund manager Whitney Tilson, who’s worried about what these new foreclosures will do to the economy. He says they’re bound to push the housing market down further, especially in those mid and higher tier neighborhoods where more foreclosures are popping up.
TILSON: This is something that’s going to be with us for a while. There’s no real way to hurry it up. As Warren Buffet said you can’t get nine women pregnant and have a baby in one month.
Another worry is that many of these distressed homes were financed by so-called jumbo loans, the kind that are too big for the government to back. So banks carry more of the risk. When these high-end homes foreclosure, it’s on their balance sheets. That makes banks even more nervous to lend. Until the crisis clears.
In Boston, I’m Curt Nickisch, for Marketplace.
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