The Foreclosure Report

Foreclosures Coming To Hot Markets

This report by Kenneth Harney looks at foreclosures and appreciation rates. "Families in high-cost real estate markets are stretching their household budgets to the breaking point to buy even a modest home. Some families are devoting 40 percent to 50 percent of their monthly incomes just to hang on to their high-priced houses."

"Given all that gloom and doom, you'd think that homeowners' growing financial challenges would be visible in their payment performances on their mortgages. But the reverse is true: Late payments on home mortgages were actually lower in mid-2005 than they were at the same time the year before, 4.3 percent of all homeowners were at least slightly behind on their payments this year versus 4.6 percent last year."

"The highest rates of late payments, by contrast, turn out to be in states with relatively low housing costs, below-average appreciation rates and slow economic growth."

"Mississippi homeowners had the highest delinquency rate among the 50 states at mid-year (8.5 percent), followed by Louisiana (6.7 percent), Indiana (6.66 percent), Tennessee (6.32 percent), Texas (6.31 percent) and Ohio (6.13 percent). All of these states have moderate- to below-average housing costs and ranked among the slowest-appreciating markets in the country last year."

Mr. Harney fails to see this unfortunate fact; many more folks in California would be bankrupt if it wasn't for the appreciation of their house. And many will become bankrupt, subject to the new rules, when appreciation levels off or falls, as is happening now.

The economy isn't that great in the US, and artificially high home values with the attendant equity-borrowing are merely masking that fact.

posted by Ben Jones @ 7:15 PM