Foreclosures Way Up; Home Equity Way Down

It’s no surprise that foreclosures in 2007 were sky-high — the highest, in fact, since the Mortgage Bankers Association began keeping records more than 30 years ago, according to this story in the L.A. Times. But the association’s report contained some interesting stats:

– About 2% of mortgages nationwide are in foreclosure, and another 6% are delinquent.

– In California, 2.23% of mortgages are in foreclosure, with 5.39% delinquent.

– Among “prime” mortgages — given to people with higher income and good credit histories — only about 4.5% are in trouble, both nationwide and in California. 

– Nearly 3 in 10 “subprime” mortgages — held by people with lower income and sketchy credit — are in arrears.

Worse, more people than ever have little or no equity in their homes:

[F]or the first time since it began keeping track in 1945, the Federal Reserve said Thursday that Americans last year owed more on their houses than they owned. For the last nine months of 2007, the amount of equity in American homes dropped below 50% of their value, the central bank reported in newly revised figures. About 35% of American homeowners do not hold mortgages — they either paid off their homes or bought them outright — and so the remaining 65% owe significantly more than 50% of their home’s value.

The story did include some good news.  Because the Fed has been slashing interest rates, attempting to prevent the U.S. economy from sinking further, consumers with adjustable-rate mortgages might see their payments stay the same or even go down when they reset. Unfortunately, that won’t prevent them from owing more than their homes are worth.

Recent Redfin posts:
Sherman Oaks’ New Market Reality
Why Bailing Out Homeowners Doesn’t Make Sense