The plague of foreclosures is still overrunning the US real estate market, and the situation may actually be getting worse.
RealtyTrac reports that July numbers rose 7% month-over-month and 32% over July last year, with 360,149 homes going into foreclosure, which is one in every 355 housing units. “July marks the third time in the last five months where we’ve seen a new record set for foreclosure activity,” noted James J. Saccacio, chief executive officer of RealtyTrac.
It is still hard to pinpoint the exact cause of the problem. One is certainly that rising unemployment makes fewer and fewer people able to stay in their homes. Another is that the federal government’s programs to lower monthly payments to allow people to keep their houses is an ongoing failure which is hardly putting a dent in the foreclosure trend.
The most important contributing factor to foreclosures could be the falling value of residential real estate. A recent report from Zillow showed that 22% of mortgages are underwater and that the number could go as high as 30% by the end of next year. Homeowners who believe that they will never be able to sell their homes at a profit may be making the decision to abandon those properties so that they are not stuck with years of paying for a house that will never have an economic benefit for them.
The ongoing foreclosure increase means that housing prices have little chance of improving now. Foreclosed homes are flooding the market with properties which are going to be auctioned or sold at extremely low prices.
A housing recovery, both in price and sales activity, could still be a year or more off.
Douglas A. McIntyre
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