The number of U.S. homeowners entering foreclosure climbed 75 percent in 2007 from a year earlier as mortgages became more difficult to refinance and falling property values made it tougher to sell.
More than 1 percent of U.S. households were in some stage of foreclosure during the year, up from 0.58 percent in 2006, RealtyTrac Inc. reported last week.
“There are more to come,” said Paul Miller, a mortgage industry analyst at Friedman Billings Ramsey & Co. in Arlington, Virginia. “People who never should have been in a home bought them, and now the easy money is gone.”
Home prices fell in 2007 for the first time in at least 40 years, and the number of mortgages available to homeowners dropped, creating concern the housing slump will hurt consumer spending and push the world’s largest economy into recession.
Mortgage originations probably declined 14 percent to $2.34 trillion in 2007 compared with 2006, according to a forecast by the Washington, D.C.-based Mortgage Bankers Association.
Home prices in 20 U.S. metropolitan areas fell 7.7 percent in November, in the 11th consecutive month of declines, according to the S&P/Case-Shiller home-price index released last week.
Mortgage originations are expected to decline another 34 percent to $1.55 trillion in 2008, the mortgage bankers said.
A record $375 billion of subprime loans reset to higher payments in 2007 and another $340 billion will reset this year, said Bose George, an analyst at Keefe Bruyette & Woods Inc. in New York.
The number of U.S. homeowners entering foreclosure doubled in December from a year earlier, RealtyTrac said. For the year, more than 2.2 million default notices, auction notices and bank repossessions were reported on about 1.3 million properties.
As many as 750,000 homes will go into foreclosure this year, “coming on at distressed prices” and adding to the supply of available homes, said Rick Sharga, executive vice president for marketing at RealtyTrac. The Irvine, California- based seller of foreclosure information has a database of more than 1 million U.S. properties.
The median price of an existing single-family home dropped 1.8 percent in 2007, according to the National Association of Realtors. The Case-Shiller index showed a drop in 17 cities from a year earlier, and all 20 cities showed a decline from a month earlier. The group’s 10-city composite index, which has a longer history, fell a record 8.4 percent in the 12 months ended in November.
New home sales dropped 26 percent for the year, the most since records began in 1963, the U.S. Commerce Department said. (READ MORE)
“People who were stretching to begin with don’t have a lot of options once prices fall,” said Paul Willen, an economist at the Federal Reserve Bank of Boston.
December had 215,749 foreclosure filings, the fifth straight month with more than 200,000 filings, RealtyTrac said. The fourth-quarter total of 642,150 filings was the most since the company began records in January 2005.
Nevada had the highest state foreclosure rate for 2007 with 3.4 percent of households entering some stage of foreclosure during the year, more than triple the national rate. Florida had the second-highest rate with 2 percent. Both states had “investor-owned properties and speculation on new condos and new homes,” Willen said.
Michigan had the third-highest rate with 2 percent of households in some stage of foreclosure and Ohio was sixth with 1.8 percent. Both states suffered from job losses and declines in the auto industry.
California, the most expensive U.S. real-estate market, had the fourth-highest rate and Colorado ranked fifth, both with 1.9 percent of households in a stage of foreclosure. The other states in the Top 10 were Georgia, Arizona, Illinois and Indiana. •
The Mortgage Bankers Association is a trade group representing the real estate finance industry. Its 3,000 member companies include mortgage firms, commercial banks, thrifts, life insurance companies and others. Additional information, including the MBA’s Weekly Application Survey, is available at www.mortgagebankers.org.
RealtyTrac Inc., based in Irvine, Calif., is a publisher of data and advice for real estate markets nationwide. To learn more, visit www.RealtyTrac.com.
Building a Strong Data Foundation in the Age of AI
Artificial intelligence (AI) has become a key priority in the boardroom and across management —…
Learn More
