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Foreclosures Hit Another High

(In case you are a seller expecting the market to "bounce back any day now" and ignore all the recent reports of the 2007 prospective of the real estate market not being any better than 2006, you may want to consider some current and developing trends.)

The most prevalent trend that looks like it is going to get worse before it gets better is the increasing rate of foreclosures throughout the United States.

So what if foreclosures are up. How does that affect the real estate market and my ability to sell a home?

The article, "Real estate foreclosures hit 2006 high," posted November 17, 2006 on Inman News explains how the growing rate of foreclosures is presenting prospective home buyers additional leverage in negotiating.

According to the leading foreclosure tracking service RealtyTrac, U.S. property foreclosures were counted at 115,568 in October which is the most foreclosures in any month this year and is a three percent increase from September as well as an astounding 42 percent increase from its year-over-year mark in October 2005.

"'So far this year more than 1 million properties have entered some stage of foreclosure nationwide, up 27 percent from the same time last year,' said James J. Saccacio, chief executive officer of RealtyTrac."

"Our data from the last three months shows that foreclosures are definitely trending upward, putting more pressure on an already strained housing market, and placing buyers and investors in the driver's seat when it comes to negotiating home purchases."

Foreclosures have been well documented throughout the year as a direct result of "nontraditional" mortgages which become very popular during the boom (2000 to 2005) that are now ending their initial low monthly rates and adjusting to rates that include either both interest and premium or have adjusted to the higher national prime rate.

Mortgage lenders and underwriters have been instructed to increase background checks and credit scoring standards to alleviate these defaults but much of the damage is done as many more homeowners are expected to be forced into foreclosure over the next year or two.

An interesting fact about all these foreclosures, however, is how the highest number of them has been concentrated in specific areas.

"For the eighth consecutive month Colorado documented the nation's highest state foreclosure rate -- one new foreclosure filing for every 327 households -- thanks to a 25 percent month-over-month increase in foreclosure activity. The state reported 5,592 properties entering some stage of foreclosure during the month, more than twice the number reported in October 2005."

Someone who was asked to predict which state has had the highest number of foreclosures this year would probably answer California of Florida since these areas grew the most during the boom. And while Colorado had the highest most foreclosures per state, an individual town in Colorado takes top honors as well.

"Greeley, Colo., posted the highest foreclosure rate for the third month in a row. The Greeley metro area (Weld County) documented 378 properties entering some stage of foreclosure, a foreclosure rate of one new foreclosure filing for every 175 households -- 5.7 times the national average."

So, as foreclosures continue to reach record numbers, expect more home owners try to sell to avoid this unfortunate fate. If they are selling to avoid a foreclosure, chances are they will be forced to drastically reduce their asking price which will be beneficial for the buyer.

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