March Foreclosures Jump 57% As Housing Woes Increase
As foreclosure filings for March jumped 57 percent from a year earlier and 5 percent from February, it is clear that that U.S. housing woes have yet to slacken. One in every 538 households received a filing last month. 44 percent were households that slipped into default for the first time and more than a fifth were homes banks took back.
RealtyTrac CEO James Saccacio says that many defaulting homeowners “are simply walking away and deeding their properties back to the foreclosing lender.” As a result, bank repossessions have more than doubled while auction notices are only up 32 percent.
“In a lot of cases, banks worked something out with the owner in advance and took back the keys and deed. For a homeowner, it’s not as embarrassing and it’s a little less of a blemish on their credit record compared to a foreclosure,” says RealtyTrac’s vice president of marketing Rick Sharga.
The worst isn’t over. The wave of adjustable-rate loans resetting to higher rates will crest in May and June. Maturing ARMs are expected to push more homeowners into default and/or foreclosure in the third and fourth quarters of this year. According to analysts at Citigroup, about $460 billion of adjustable-rate loans are scheduled to reset this year.
"Any time you take on an ARM, you have to understand there's going to be risk, and in many cases, that wasn't explained," says Brian Bethune, an economist with Global Insight. Celia Chen, director of housing economy at Moody's Economy.com, notes that ARM resets might not be so bad for some homeowners since the Federal Reserve has aggressively cut interest rates. In some cases, an ARM will actually reset down to a lower rate.
Sharga estimates between 750,000 and 1 million or about a quarter of the homes up for sale (bank-owned properties) will hit the market this year. In some areas, properties will continue to slow sales and depress prices further. In an April 10 report, Lehman Brothers Holdings Inc. analysts led by Michelle Meyer said that about 2.5 million foreclosed properties will be on the market this year and in 2009. U.S. home price declines will probably double to a national average of 20 percent by next year with lower values likely for metropolitan areas in California, Florida, Arizona and Nevada, mortgage insurer PMI Group Inc. said.
"We're not near the bottom of this at all,'' said Kenneth Rosen, chairman of the Fisher Center for Real Estate at the University of California at Berkeley. "The foreclosure process will accelerate throughout the year.'' Rising foreclosures will add more inventory to an already overstocked market, keeping home prices down through at least next year.
"A normal recession is 10 months. We think this one may be twice as long,'' Rosen advised.
