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Property Seizures Decrease in Fourth Quarter



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By : Karim El Sheikh    99 or more times read
The Mortgage Bankers Association has released its figures for the fourth quarter of 2010 and the reviews are mixed about the findings. The report has shown that homes in foreclosure had risen in the last quarter to 4.63 percent. This is higher than third quarter results, yet the figure may be skewed. Most of the major banks halted many of their foreclosure proceedings in the fourth quarter in an effort to respond to the robo-signing scandal. Experts are not sure if this increase in foreclosures would have been higher if the self-imposed moratorium was not in effect.

The MBA also stated in their report that 1 in 7 homes are either facing foreclosure or are behind in their mortgages at this time. However, mortgages that were behind in their payments actually fell nearly a full percentage point in the fourth quarter from third quarter figures. Improvements in the economy and consumer confidence are believed to have contributed to the improvement in this figure. It is anticipated that first quarter figures will show a continued improvement in the economy, which will help stabilize the real estate market.

Economists are closely watching the figures for the first quarter of this year. As major lenders begin to resolve the legal issues from the robo-signing, and begin to process foreclosures again the figures could show significant increases. These increases, while only a market correction, may send the wrong signals through the real estate market, creating fear that another crash is about to take place.

High performing borrowers, often referred to as prime borrowers, saw an increase in foreclosures. This group of borrowers usually has the lowest incidence of default, yet saw an increase to nearly 4% in the fourth quarter, a surprising increase. On the other side of the issue, prime borrowers that had late payments on their mortgages actually dropped a half of percentage point during this same period.

The National Association of Realtors reported that during the last quarter home prices dropped again by another 1.1%, creating more stress on the home market. As more homes decrease in value, more homeowners risk foreclosure. Decreasing market value on homes places many homeowners in the negative equity category. Once a home has negative equity it is nearly impossible to sell. Homeowners facing the option of selling or facing foreclosure are usually forced into default because of the negative equity. Currently it is estimated that nearly 30% of all homes have negative equity.

Foreclosures are the leading cause for falling home prices. These homes tend to sell at prices way below market value, causing surrounding homes to decrease in value as well. Investors and single home buyers have become reluctant to purchase any properties because the high foreclosure rate is sure to send prices even lower. The reluctance causes more homes to default, and the trend continues to spiral downwards. This scenario must be broken for the housing market to heal.

The Federal Reserve has stated that the current real estate market is a large contributing factor to the economic slow down. Depressed housing prices result in lower consumer spending which leads to an economic slow down. It is anticipated that 2011 will bring an end to this cycle. Market analysts believe that home prices will continue to fall through spring as lenders clear their books from the robo-scandal and will begin to rebound in summer. It is predicted that this summer will also bring an increase in new housing start ups- a great indicator of economic recovery.

Many economists are predicting a revival in the housing market by summer. Lower unemployment figures coupled with an expanding economy should correct home pricing and provide the market a much needed boost.
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