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Listings of Foreclosure Homes Pulled Housing Prices Down in 4Q

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By : John Cutts    99 or more times read
Listings of foreclosure homes pulled down the prices of residential properties in the U.S. last quarter as these houses got sold at heavily discounted rates. The decline in prices also resulted an increase in the number of homeowners holding underwater mortgages or loans that are worth more than the properties for which these loans were taken out.

Bank foreclosures short sales and heavily discounted distressed properties accounted for a huge percentage of total housing sales made in the October-December 2010 period. This resulted in the price of single family houses to decline by 2.6% compared with the third quarter of 2010. When compared with the 2009 fourth quarter, the price decline was 5.9%. Houses sold during the last three months of last year had a median price of $175,200.

With properties from lists of repo homes for sale dominating sales transactions, prices were off last quarter by 27% from the peak value recorded in June of 2006. Moreover, the huge amount of foreclosed properties also helped increase the number of underwater mortgages in the U.S. According to fourth quarter housing data, over 15 million borrowers had underwater loans, representing 27% of total loans owned by single family dwelling owners.

The number of homeowners with negative equity or underwater loans during the fourth quarter represented an increase from the 2010 third quarter, when 13.9 million underwater mortgages were recorded in the country. According to housing market analysts, the number of households with negative equity will likely increase again this year as listings of foreclosure homes are expected to increase further in 2011.

Analysts stated that aside from heavily discounted foreclosure home auctions for sale and declining housing unit prices, underwater mortgages also increased because of the high unemployment level of the country. For the fourth quarter of last year, unemployment in the U.S. was around 9%.

Despite the discounted selling prices of properties in listings of foreclosure homes, the problem of job loss has contributed to lowering homebuyer demand last quarter. Analysts expect the values of properties to decline by another 5% this year as more foreclosures flood the housing industry.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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