Foreclosure statistics for the first half of 2010 have been released; the results are mixed. For the first 6 months of the year foreclosures were down 5 % from the previous 6 months. This is a good sign, showing that mortgage modification programs may be helping and that the economy may be turning around. However, these same numbers were 8% above the same time period for 2009, a bad sign that recovery may still be far away. The next six months will be the deciding factor if the housing market is improving or not.
The first 6 months of 2010 saw over 1.9 million foreclosure proceedings initiated. This staggering amount accounts for an average of 1 in 411 homes receiving notice. Some areas were much higher, while others reached a staggering 1 in 78 receiving notice.
When the foreclosure market is this high it is bad for new home builders and existing home sales. Foreclosures present good opportunity for investors because they drive the prices low on the homes. Builders and other home owners are required to drop their prices to compete with the flood of bad mortgage homes.
Freddie Mac reported that in the second quarter, the amount of bad loans actually decreased. However, the full two quarter total is higher than expected and larger than the figures for last year.
Senior economists at several major mortgage lending firms have stated that the trend is bound to worsen as the end of the year approaches. Foreclosures are expected to increase through the remainder of the year and sales are not expected to increase. New legislation attached to the recent financial regulations bill signed into law by the Obama administration has many new mortgage related regulations. Banks and lending institutions will become even stricter with lending policies in an effort to comply with new regulations. This will decrease the amount of sales. The last six months of the year are generally slow for sales anyways. With school starting and holidays approaching people are less likely to initiate a move.
Builders have found that the flood of foreclosure properties on the market is stifling their business. Many of the homes that have been foreclosed on are nearly new and people are able to purchase them far under market value. The competition has closed many builders and created a large list of layoffs.
California, Arizona, Nevada, Florida and Michigan continue to have the highest foreclosure rates in the country. States that are not battling high unemployment have lower foreclosure rates. Proof that foreclosure and unemployment go hand in hand.
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