Monday, April 24, 2006

Late Speculators Being 'Washed Out'

Lots of foreclosure news out today. "Foreclosures jumped 72 percent in first-quarter 2006 compared to first-quarter 2005, according to RealtyTrac. The first-quarter 2006 foreclosure report revealed that 323,102 properties nationwide entered some stage of foreclosure, up 38 percent from fourth-quarter 2005. The nation's quarterly foreclosure rate of one new foreclosure for every 358 U.S. households was higher than in any quarter of last year, the company also reported."

"'The sharp increase in foreclosures, continues a steady upward trend that we've observed since the beginning of last year,' said James J. Saccacio, RealtyTrac CEO, in a statement. 'Foreclosures have now increased in four consecutive quarters and are on track to go above 1.2 million in 2006, which would push the nation's annual foreclosure rate to more than 1 percent of U.S. households.'"

"'With the current market conditions, it's unlikely that foreclosures will return to the historically low levels they were at in recent years when interest rates hit rock bottom and home price appreciation skyrocketed in many areas of the country,' he stated. 'But it's possible that foreclosures will flatten or even move a bit lower this Spring if more buyers and investors enter the market, giving homeowners in distress a better chance of selling their properties to avoid going into default or foreclosure.'"

"Georgia documented the highest state foreclosure rate in the first quarter of 2006 – one new foreclosure for every 127 households. The state reported 24,419 properties entering some stage of foreclosure, which is more than double the number reported in the previous quarter and triple the number reported in first-quarter 2005."

"Colorado had the second highest state foreclosure rate in the nation – one new foreclosure for every 138 households and a total of 13,267 properties entering some stage of foreclosure in the first quarter. The number of foreclosure properties in Colorado more than doubled since fourth-quarter 2005 and represented a 96 percent increase from first-quarter 2005."

"Indiana was third on the list with one new foreclosure for every 165 households, and 15,261 total properties in a foreclosure process, an 84 percent increase from the previous quarter and more than double the number reported in first-quarter 2005. Nevada, Michigan, Texas, Ohio, Tennessee, Utah and Florida also were among the states with the highest foreclosure rates in first-quarter 2006."

"Mortgage foreclosure activity in the first quarter of 2006 increased significantly from the fourth quarter of 2005 in several western and southwestern housing markets. A real estate investment advisory firm reported that the biggest increases were in major urban centers. Los Angeles County recorded 6,314 pre-foreclosure filings and foreclosures through March, up from 4,911 in the fourth quarter of 2005. In San Diego the numbers jumped from 1,565 in the fourth quarter of 2005 to 2,241 in the first quarter of 2006."

"Alexis McGee said such increases coincided with cooling markets in previously overheated areas, and with the steady rise in interest rates. She added that rampant speculation in some markets, along with a slowdown in price appreciation would lead to an increase in delinquencies and foreclosures."

"'In Las Vegas, this appears to be already happening,' she said with foreclosure activity on 3,246 homes the first quarter, compared to 1,480 in the previous quarter. 'Speculators who came late to the party are being washed out of the market,' she said."

"McGee pointed to 'exotic mortgage products' that enabled many homebuyers to join the recent housing frenzy on the West Coast. In San Diego, for example, more than half of home purchases in 2004 and 2005 were financed with such loans."

"A combination of overbuilding and rampant speculation in the South Florida condo market could lead to a severe price correction. 'Local realtors there report that the speculators were selling to each other,' said Ms. McGee. 'We've seen that before, in Phoenix, AZ and Las Vegas, NV. Sooner or later they come to the end of the line and foreclosures jump.'"

"'Foreclosures are already happening at twice the national average,' she pointed out, adding that the number unsold condos in that area has reportedly doubled in the last year."

"New foreclosure filings in three Chicago metro suburban counties increased sharply month over month in February, offsetting decreases in other Chicagoland counties. 'We saw a 31% jump in Will County,' said Alexis McGee, 'as well as 29% and 18% increases in McHenry and Lake counties." She went on to say that drops in default activity in Du Page, Kane and Cook counties brought the overall Chicago metro increase down to 5%.'"

"'Nevertheless, we're seeing accelerated foreclosure activity in the midwestern states that are heavily dependent on the manufacturing sector,' said Ms. McGee. She pointed to strong increases in the number of bank owned properties in the region. 'In Michigan, for example, REO (real estate owned by bank) increased to 7,097 properties in February from 3,744 in December,' Ms. McGee said. She went on to say that in Indiana, the numbers had jumped from 1,745 to 3,307, and in Ohio from 4,187 to 7,032."


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