Forclosure and Credit Statistics -- How do we help Buyer's and Seller's

Foreclosures

According to the Mortgage Bankers Association:

• 1 out of every 200 homes will end up in foreclosure.  For a large city like Washington, this translates into 3,000 families losing their homes due to foreclosure
• 250,000 families enter into foreclosure every 3 months.
• In every classroom, one child will become at risk of losing their home based on their parent's inability to pay the mortgage.
• 6 out of every 10 homeowners that fall delinquent on their mortgage payments are not aware lenders have programs available to assist.
• Due to the embarrassment, lack of knowledge, or the likelihood they will lose their home more quickly; homeowners do not contact their lenders when they fall delinquent.
• Foreclosures have increased by 38% this quarter and 72% compared to last year.

According to the Homeownership Preservation Foundation of 60,000 homeowners:

·         43% of American households spend more than they earn annually.

·         52% of employees live paycheck to paycheck

·         Almost 42% of all American households do not have sufficient assets to support themselves for a minimum of 3 months.

·         46% of American households have less than $5,000 in liquid assets which is inclusive of IRAs.

·         Low and moderate income households which enter a repayment plan are 68% less likely to lose their home to foreclosure.

Why do homeowners foreclose?

• 32% lose their jobs
• 25% experience a health crisis
• 85% have missed one mortgage payment already
• 50% have missed two or more payments
• Most individuals have no savings, no available credit, and extended families have limited resources to help.
• Most loans are less than 3 years old and are first-time loans.
• Some have refinanced multiple times; two or three.

The cost of foreclosures is astonishing:

• Losses on foreclosures range from 20 up to 50 cents on the dollar.  A typical lender will lose as much as $50,000 or more on one foreclosure.
• One foreclosure can impose as much as $34,000 in direct costs to local government entities.
• One foreclosure can reduce property value and home equity for nearby homes by as much as $220,000.

Credit Card Debt

According to a survey conducted by the National Association for Business economics:

• The average interest rate on a credit card climbed to 19% in March 2007 vs. 16.5% in 2003.
• College Students have increased their use of credit cards:
• 43% of freshman have a credit card
• 74% 4^th and 5^th year students have a credit card
• 41% of these student carry a balance with a median amount of $1,000
• 25% of these students utilize the card for tuition

• In 1968 the total credit card debt for consumers was $8 billion; today this exceeds $880 billion.
• Within the past 5 years consumers who utilize their card to accumulate points has increased by 23%.
• 4 out of 10 "young" consumers; between the ages of 18 and 21, who surf the web, have a credit card.  65% of these consumers utilized the web to apply for the credit card.
• The average number of cards per consumer is 4; 1 in 10 consumers have more than 10.
• Medical expenses have contributed to 29% of low and middle income household's credit card debt.
• Fast food credit/debit card expenses have skyrocketed to $51 billion in 2006 vs. $33.2 billion less than one-year ago.
• Approximately half of credit card holders pay only their minimum payments.
• The Federal Reserve has reported that 40% of American families will spend more than they earn.
• 23.8% of American households do not have a credit card and 31.2% pay their recent credit card balance in full.
• 1 out of 50 households have more than $20,000 in credit card debt; however, this represents more than 2 million American homes.

Personal Debt Statistics 2006-2007

Market share by major credit type:

• Visa-54 percent
• MasterCard- 29 percent
• AMEX- 13 percent
• Discover Card- 4 percent

American Consumers

• There was an astonishing 984 million bank-issued Visa and MasterCard debit/credit accounts in 2006 for the U.S.
• Total consumer debt; excluding mortgage topped $2.46 trillion in June 2007 vs. $2.398 at the end of 2006.
• Revolving debt reached $904 billion in June 2007 vs. $879 billion at the end of 2006.
• 8.3% of American households owe $9,000 or more on credit cards.
• 51% of consumers have a credit card.
• 14% of Americans will use 50% or more of their available credit and on average has 6.6 credit cards.
• The average credit score of those utilizing 50% of their available credit have an average credit score of 645 vs. the national average of 674.
• Of every $100 spent, $40 is some other type then cash or a check.
• U.S. Visa cardholders generate more than $1 trillion in annual volume.
• The average age of consumers debt obligations is 14 years; making it evident that they have been managing credit for quite some time.  1 out of every 4 consumers has credit histories more than 20 years.  1 in 20 consumers have credit histories less than two years.
• The average consumer will have access to $19,000 cumulatively on credit cards; but less than 30% are utilizing the total credit limit.
• 1 in 7 are utilizing 80% or more of their total limit.
• 40% carry a balance less than $1,000
• 15% exceed $10,000 in credit card balances
• 48% carry a balance less than $5,000

In looking at statistics for credit and forclosures, we should all take heed to both help ourselves and out buyers and sellers.  We must all be aware of how to help out buyer buy smart and out help our sellers know that their buyers are truly qualified.  We as Real Estate professionals owe it to our industry to help reduce the forclosure statistics by being informed and helping out clients to be more informed as well!  Let us all begin to help!