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THE FORECLOSURE MARKET...THE NEW PERFECT STORM
Posted by V.K. [Mel] Melhado P.A. on Tuesday, July 31st, 2007 at 4:24pm.Foreclosures are in the forefront of the news and are taking their toll on the regular homeowner market as well as affecting complete neighborhoods. Properties that are not short-selling and go out to foreclosure will most certainly affect property values in the neighborhood where that foreclosure took place. Naturally the more foreclosed properties in a particular neighborhood, the more pressure on the downward pricing.
With the banks and lending institutions not wanting to be in the real estate business, they will dispose of the foreclosed properties by selling them for substantial losses, which will help to further depress an already depressed market. Those selling prices will now become the new benchmarks for appraisals, dragging the market prices down even further.
Across the country, foreclosures were up some 58% just in the first half of 2007. Projections are that there could be well over 2,000,000 filings prior to the end of the year. The states currently with the highest amount of filings are Florida, California, Ohio and Texas. What is driving the foreclosure market are the huge amount of borrowers with sub-prime loans, along with those with adjustable rate mortgages now adjusting. Last week Countrywide, one of the nation’s largest lenders, announced that some of their low risk borrowers were having trouble making their mortgage payments, which is not good news.
Some analysts feel that despite the downward pressure created by the general cooling off of the market, as well as the foreclosures, will, in the long run, help the markets that were overpriced. The philosophy is that it will help to speed up the healing process.
V.K. [Mel] Melhado PA
Downing-Frye Realty, Inc.
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