- Despite the odd ray of hope the news is not good
- Can the softly fragile market withstand a further onslaught?
The flood of foreclosures that has been sweeping across the American property landscape and back again, is showing no more sign of abating than it did when it helped set off the general economic woes that swept across the world.
While latest information tracked by market leaders suggests that the rate of foreclosures in America decelerated in 9 out of 10 of the worst affected metros during the first 6 months of 2010, it also reveals that this was not the case as well in metros with over 200,000 residents. There, 3 out of 4 metros reported increased rates of foreclosures, with 17 out of 20 of the worst increased recorded regions in California and Florida.
During the first 6 months of the current year, lenders filed foreclosure notices against 1.6 million American properties, including the full spread of default notifications, bank repossessions and auction sale advices. That rate is 8% up year-on-year and on track to reach 3 million notices for the full 2010, which could well exceed 1 million bank repossessions. Whereas sub-prime borrowers were mainly previously affected, this year the ranks have been noticeable swelled by Americans from unemployment queues.
This latest trend serves to emphasize just out fragile the apparent improvement is, and how high the unemployment threat looms. How effective is Obama’s Home Affordable Modification Program and other mechanisms designed to forestall foreclosures? What are the chances of unemployment worsening, and bringing the whole pack of cards tumbling down? I spoke to a leading market analyst who was not optimistic. “If unemployment continues to be high and foreclosure prevention programs merely delay the inevitable,” he told me, “then we could continue to see increased foreclosure activity and a corresponding weakness in home prices in many metropolitan areas.”
The districts in the Joliet, Naperville and Chicago metro areas appear to suggest that the market analyst could be correct. In the course of the past 12 months, 76,000 jobs were lost while the foreclosure rates rose by up to 23%.
This seems to reinforce current thinking in many quarters that Obama’s HAMP program has been no more effective than George Bush’s HOPE for Homeowners project. An increasing number of homeowners, consumer advocates and community groups claim that the root cause for failure is the lack of sufficient pressure on banks to modify the terms of mortgage loans.
When launched, Treasury Department officials spoke confidently of assisting 3 to 5 million troubled American households. Thus far, just 390,000 have been assisted after registering with HAMP (although banks are at pains to point out that many more have been assisted directly). You could find out what happens next when you follow this story at www.foreclosuredatabank.com.
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Written by Alex Rolim.
