A leading industry player today reported that foreclosures are up almost 7% last quarter compared to the previous one. This comes as a shock following the relatively good figures for January and February 2010, and was caused by the worrying 19% increase in March.
Is this a sign that underwater borrowers are just giving up in the face of an emasculated HAMP, or are lenders benefiting from fresh confidence following the stonewalling of Congress by a few big banks recently?
Neither scenario bodes well for the distressed American property market or for the economy as a whole. It’s also turning back into bad news for politicians. Just about every American knows somebody in trouble right now, and the voters are bound to remember current events come next election, especially how the main political parties bickered while the tidal wave rolled in.
Knowing that average statistics can be misleading, I decided to dig deeper to find out where the hot spots actually were.
I found that, whereas foreclosures are rising, default notices, which herald new foreclosures, actually dropped 1% in the first quarter of 2010 compared to the same period in 2009. This was in sharp contrast to a 36% increase in bank repossessions over the same two periods.
Repossession is typically the final step in the foreclosure process, after which the affected property is usually sold. Talk is that the banks and other lenders have a huge backlog of foreclosed property in their possession and have decided to shift these in the interests of cash flow. This is tremendous news for buyers, because the increasing over-supply in the face of softening demand will push prices further down, meaning that we could be looking at a significant drop in median house prices drop in the months ahead.
Drilling further down into the statistics for the first quarter of 2010, I unearthed the following regional detail:
The three highest foreclosure rates were reported in Nevada, Arizona and Florida, although Arizona is actually 16% down year on year.
The only other top ten State that returned a year on year decline was California (6%).
Utah, which only recently joined the top ten, recorded a 75% year on year growth, followed by Idaho at 48%.
California reported close to 84,000 new defaults in the first quarter of 2010, which was far more than any other State. Nevada was the second worst, followed by Michigan.
Colorado still holds the number ten position with a 27% increase in year on year foreclosures.
This is critical information for foreclosure buyers. It enables them to predict where the next round of value lies, and where to look for bargains.
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