NEW YORK – UNITED States foreclosures last month jumped 53 per cent from a year earlier, and bank seizures rose the most on record as falling property values and higher interest rates forced more Americans to give up their homes.
More than 252,000 properties, or one in 500 US households, entered a stage of the foreclosure process, RealtyTrac, a seller of default data, said on Thursday.
Bank seizures rose 171 per cent, the most since January 2005 when the company began tracking such statistics.
Foreclosure activity is at the highest since the Great Depression of the 1930s, said Mr Rick Sharga, RealtyTrac’s vice-president of marketing.
Home prices, which fell the most on record in April, have created a cycle where shrinking equity drives home owners into foreclosure, which in turn pushes home prices down further, he added.
Mr Mark Zandi, the chief economist at Moody’s Economy.com, said: ‘The foreclosure problem is getting worse and will stay with us well into the next decade. The job market is eroding and home owners have less
equity.’
Mr Sharga said: ‘We will have one million bank-owned properties by the end of the year. That will represent between one-fourth and one-third of all home sales.’
Credit Suisse analysts said in an April 23 report that about 53 per cent of borrowers with sub-prime loans – those with poor or incomplete credit histories – will have negative equity in their homes at the end of the year, and the number will rise to 63 per cent next year.
They added that tighter underwriting standards mean those borrowers whose adjustable-rate mortgages were reset to higher payments cannot refinance their loans.
About 2.7 million sub-prime borrowers will enter the foreclosure process by the end of 2012, with a peak of new foreclosures in the third quarter of this year, the analysts said.
Mr Zandi said that about US$3.5 trillion (S$4.8 trillion) in home owner equity has been wiped out since the spring of 2006, when housing prices were at their peak.
Rising mortgage defaults and auctions of foreclosed properties are adding to a glut of unsold homes and prolonging the housing slump.
Efforts by the US Congress to insure as much as US$300 billion in refinanced mortgages and save up to two million borrowers from foreclosure can work only by ’slowing down or reversing home price declines and equity deterioration’, Credit Suisse said.
Source: Straits Times – 12 July 2008
Filed under: About International, General, News : Straits Times, Property News
