Home Foreclosures on the Rise

MoneyNews from NewsMax.com

Apparently, 2005 wasn't a very good year for Americans trying to hang on to their homes.

A new study from RealtyTrac says that U.S. home foreclosures rose in every quarter of 2005, with almost 847,000 home properties going into foreclosure for the year. The data also shows a 25% hike in new foreclosures from the first through the fourth quarters.

"Overall U.S. foreclosure numbers climbed steadily over the course of the year, with more new foreclosures reported in every quarter," said James J. Saccacio, chief executive officer of RealtyTrac.

"This trend appears to be moving the real estate foreclosure market back to its historic levels."

Saccacio does temper his comments, noting that even at 850,000 properties in foreclosure for the year, that only represents 1% of all U.S. households.

And RealtyTrac says that Florida led the country in home foreclosures.

The Sunshine State accounted for 14% of all U.S. foreclosures in 2005, while Colorado was a distant second, at 1.6%.

Other states with foreclosure rates ranking among the 10 highest nationwide were Georgia, Arizona, Indiana, New Jersey, Ohio and Tennessee.

"Over the past few years, we've seen historically low mortgage rates, consistently escalating home prices and steady, strong employment," Saccacio said.

"This has translated into relatively low levels of foreclosure properties - particularly bank-owned properties. With interest rates rising and an apparent slowing of property valuations in most markets, we'll be watching closely to see if there's a material effect on the number of foreclosures in 2006."

The company also projects over 100,000 new foreclosures in its January 2006 estimates.

Says RealtyTrac: "103,540 properties nationwide entered some stage of foreclosure in January, a 27% increase from the previous month and a 45% increase from January 2005." The January estimates also say that foreclosures in the U.S. average out to one in every 1,117 households.


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"Shock" over Mortgages - 1 of the many sides to this story

Breaking from NewsMax.com & MoneyNews.com

Barron's warns that "sticker shock" is hitting homeowners with adjustable mortgages as rates have risen.

The rate increases may have grave effects for those with mortgages and the overall U.S. economy.

Ominously, the respected financial weekly says that "Over the next two years, monthly payments on an estimated $600 billion of mortgages, to borrowers with checkered or no credit histories - the "sub-prime" market, may zoom as much as 50 percent higher as the two-year teaser rates on hybrid adjustable-rate loans expire."

Barron's calls this a "reset problem" that poses a significant risk to the country's economic well-being.
Mortgages taken out by sub-prime borrowers include Hybrid ARMs, with low teaser rates in the early years, and IO Mortgages, which initially charge interest only.

Nearly all the $1 trillion in outstanding sub-prime loans were taken out in the past two years, most with an introductory rate period of only a few years, so the "teaser rates" on many of these loans are due to expire shortly.

Worse still is that due to the Fed's hikes in short-term interest rates, adjustable mortgages will see a boost in interest rates when they reset, according to Barron's.

In the recent past, borrowers who couldn't handle the increase in their monthly payment could sell their home to pay off the mortgage and even reap a profit, thanks to soaring housing prices.

But home prices now appear to be leveling off and in some places even declining. And inventories of homes are dramatically rising - meaning it will be difficult for borrowers to sell off their properties like they could in recent years. And many borrowers have only a narrow gap between what they owe on their mortgage and the price their house could fetch if sold - or no gap at all.

Doug Duncan, chief economist of the Mortgage Bankers Association in Washington, D.C., is optimistic:

"I just don't see any coming collapse in the sub-prime market as long as the U.S. economy and job growth stays strong and interest-rate increases remain subdued."

But according to one doomsday scenario outlined by Barron's, we could see "a coming spiral in delinquencies, foreclosures and credit losses from tapped-out, sub-prime borrowers facing monthly payments they can't meet."

Sir John Templeton first warned housing prices could crash 50%. Find out what he said and learn how to protect yourself and even profit from the coming storm @ NewsMax.com's Financial Intelligence Report.

Housing Market Changing ?

We have all been curious as to where this housing market is headed. None of us has a crystal ball and opinions are varied. Here is a different point of view.

Goldman Sachs worries about housing
Here's an interesting piece of research from Goldman Sachs about the housing market.

Here are the highlights:

Surging Home Inventories Start to Push Down Prices

* The December existing home sales report suggests that US housing market conditions are deteriorating rapidly. Adjusting for normal seasonal variation, inventories of both single-family homes and condos appear to be surging.

* Presumably because of rising excess supply, median prices have begun to fall sharply. From October to December, we estimate that the seasonally adjusted median price of single family homes declined by the largest percentage in any two month period since 1986.

* Unless the market bounces back sharply in early 2006, we may need to revisit our view that US house prices are set for stagnation rather than outright declines. A pronounced decline could call into question our forecast that real GDP growth will not slow below trend until the fourth quarter of 2006, and might even imply that the FOMC will need to revert to monetary easing before the end of the year.