Some Troubling Foreclosure Trends
This recent story in Investor’s Business Daily focuses on “walkaways” as more and more Americans simply give up and abandon their homes. It’s no secret that this is becoming more common, but the story did point out some interesting stats and trends.
– About 40% of homes bought a year ago in Los Angeles (presumably, this means greater L.A.) are “underwater” — that is, the “owners” owe more than the property is worth.
– Nearly 8% of homeowners nationwide are behind on their mortgages right now.
– People who can afford to pay their mortgages but still opt to walk away are contributing to an increase in delinquencies. California, always the trendsetter, is leading the way in this trend, according to Don Truslow, Wachovia’s chief risk officer, quoted in the story.
– More folks are choosing to live in their homes during the six-month foreclosure process, pocketing the thousands they would have paid toward their mortgages.
The story points out that walkaways aren’t new; they happened during the mid-1990s downturn too. But this time, the reasons are different:
[B]ack then, foreclosures typically arose amid unforeseen changes in the economic condition of the borrowers, says Charles Dannis, president of Dallas real estate valuation firm Crosson Dannis. “This time we don’t have that true economic change in the borrower’s condition,” said Dannis, who also teaches real estate at Southern Methodist University’s Cox School of Business. “You have a collapse of a housing market that most people really attribute to speculation, or because people are buying more house than they can afford because of the various exotic mortgage products out there.”
What does it all mean? Despite Realtors’ insistence that a recovery is just around the bend, it’s going to take a good two to three years before the bad loans work their way out of the market and prices come back down to Earth. In the meantime, hang on: It’s going to be a bumpy ride.
Recent Redfin posts:
Foreclosures Take a Dive
Just Listed: Am I Hot or Not?
Note to Sellers: It’s the Price, $tupid!
