Posted on Thursday, April 15, 2010
Foreclosures are up 35% from last year.
You'll recall the numbers had decreased 2% in February and 10% in January (not unlike a decrease we saw in January and February last year). But the big news is that March foreclosures numbers are now up 19% from February – the biggest increase ever.
250,000 folks lost their homes between January and March of this year and almost 1 million are entered the foreclosure process. Thats 1 in every 138. 70% of these are in 10 states. Topping th elist; Nevada 1 in 33, Arizona 1 in 49, Florida 1 in 57, California 1 in 62.
These newest numbers are said to indicate we're on pace for over 1 million in 2010, but I would predict we're on the path for more than that. However, the real issue may be short sales and deeds in liue under HAFA or otherwise. These are essentially foreclosures in disquise. Granted they don't clog up the court systems the same way. And some will argue they save lenders money over a foreclosure. But the impact of short sales and DIL on the rest of us is essentially the same as a foreclosure - the resale value of distrseed property is about 30% less, whetehr its a foreclosure, a short sale or a DIL. That's a 30% hit on comparable sales whebn any of us go to refinance of sell our own home. Essentially a potential 30% hit to our home value. Inventory rose by almost 10% last month to almost 9 months supply. In a good market 300,000 homes are sold each month. Now banks are taking back almost that many and adding them into inventory. And that was all when foreclosures were down for January and February!
Think about it. If the 4 to 5 million people the Administration thought would benefit from HAMP and did not now line up for HAFA short sales or DIL, thats 4 to 5 million comparable sales that will drag down everyones home values. Only 30% of sales now are distressed and home sales and prices seems to be stalling.
When that happens we're bound to see more folks finding themselves under water and, in turn, thinking about a short sale or deed in lieu. The adverse feedback cycles contineus. What we really need is solutions that will contain the problem, not cause it to spread.
Already 11 million are thought to be underwater, a number expected to grow to 28 million or perhaps more thanks now to HAFA.
The only hope is that HAFA will not be embraced by the lenders. Afterall, it requires lenders to write down principal (a soluiton that should only apply to very few ion a careful case by case basis), waive deficiencies and (if the first lender hold the second) waive the second, both requirements that could have dire accounting, legal and regulatory consequences for some already shaky banks. Not to mention long terms impacts on the ability for all of us to get mortgage money again.