Foreclosure Factors: Straight Talk on the Housing Market TrendThursday, May 1, 2008
Coldwell Banker Residential Brokerage
May 1, 2008 —The media is continuing with more foreclosure stories and statistics focusing on the percentage increase in foreclosed houses. Losing a house is a devastating thing for homeowners. There are many factors that cause foreclosures. The major factor is the depreciating prices of houses in many areas.
In the previous market with appreciating prices, when homeowners had a personal financial reversal or an increase in their adjustable mortgage that was beyond their reach, they could sell their house for more than they owed and come out whole. In a depreciating market, those homeowners find they owe more than the current market value of their house and have three possible situations depending on their financial resources. If they have enough extra money, they can sell their house and bring a check to the settlement table to make up the difference. Or they can negotiate with their one or more lenders to work out a short sale arrangement to sell their house for less than the total mortgage debt. The final one is to let the foreclosure process go through.
The statistics we hear focus on the obvious percentage increase in foreclosures over the previous year. If we listen to the media hype, it appears as if a large number of houses are foreclosed. However, the national percentage of foreclosures is still less than 2% of all houses. In some areas where a large number of speculating investors brought houses to flip them quickly such as Florida and California, the percentages are higher. In our area here in Northern Virginia and the DC Metro region, we are a little less than the national average.
The foreclosure factor has some impact on the market for sellers when REO’s (what the banks call the properties they have foreclosed) sell for less. It also has some impact for buyers who may buy a foreclosed property for what might be less. For information about how the market is doing in the counties of your interest, see the two graphs by county in this report. For other real estate information and expertise, please contact me at any time.
Licensed VA Real Estate Agent