End-of-Quarter Foreclosure Rates Hit Record Highs!
While the median prices of homes in the United States have been falling at unparalleled rates, foreclosure rates from the second quarter of 2007 are up, up, up, to record highs. Of course, this correlation should come as no surprise—local foreclosures are a major contributing factor to the value of homes in an area.
The survey by the Mortgage Brokers Association for the quarter ending on June 30 showed results for the rate of foreclosure filings to be impressively high for those who follow market trends. The seasonally-adjusted rate of loans that went into foreclosure on one to four-unit residences was 0.65%, the highest level over the entire 55 years that the survey has been taken.
In terms of pure numbers, the number of mortgages viewed for the survey is 44 million, meaning a total of 286,000 homes went into foreclosure. In one three-month period, that’s astounding!
The new rate bests the previous record set in the first quarter of this year, which was a still-impressive 0.58%. One year ago, the rate stood at 0.43%, more than a tenth of a percentage lower.
However, despite this, the numbers in each state are not universally up. Thirty-four states actually had decreases in the foreclosure rates, and another twelve states showed only modest increases.
So if so many states have foreclosure rates that are down, what’s responsible for the record high? Four states, actually: California, Florida, Nevada and Arizona. In fact, these four were so high that if one were not to include them in the statistics, the country would have showed an overall decrease!
Considering the fact that these states have conventionally been locations of great real estate growth over the past ten or so years, and thus also of increases in home prices, it should come as no surprise that they are experiencing corresponding increases in foreclosure filings of record proportions after the housing bubble.
For example, when median home prices for the second quarter were released recently, the market in Miami, Florida area exhibited one of the most drastic decreases in the United States. Because that area had been booming for the past several years, when the market corrected itself, prices dropped in a hurry. And, it should come as no surprise that Florida is on the list of those four states where foreclosure filings had increased dramatically.
In terms of adjustable-rate mortgages, California has 17% of subprime mortgages in the country and more than 19% of all foreclosure filings started on these types of mortgages; additionally, California, Florida, Nevada and Arizona make up more than one-third of the subprime adjustable-rate mortgages in the United States and also more than one-third of started foreclosure filings.
Another interesting figure included in the MBA survey was the rate of outstanding loans that were in foreclosure, which was 1.40%, also up from 1.28% in the previous quarter and 0.99% a year ago.
One thing is for sure: the housing crisis is not relenting, and these rates are going to get worse before they get better. Though President Bush recently outlined new plans to aid families affected by the subprime crisis, only a small percentage of homeowners will be reached by the refinanced loans made available. Relief will come for some American homeowners, but for many, all they have to look forward to is dropping house prices and the real possibility of foreclosure.