Monday, August 21, 2006

'Speculators Are On The Run'

Some foreclosure news from across the US. "Foreclosure activity in several Western markets rose in the second quarter compared to second-quarter 2005 after a dip in the first quarter year-over-year foreclosure activity, according to a foreclosure research company."

"'Both Las Vegas and Phoenix were impacted by speculators,' president Alexis McGee said, and more than 25 percent of new home sales in both markets were going to out-of-state investors. 'The speculators are definitely on the run, and walking away from properties they cannot afford to hold and cannot sell at a profit.'"

"Foreclosure activity in the Denver metro area was among the highest in the nation. About 5,300 homes in Colorado have already been lost in foreclosure this year, and more than 11,300 homes were in a pre-foreclosure process as of Aug. 11, McGee reported."

"'A more severe situation, however, is in California,' she stated. 'A primary reason is the overwhelming use of so-called creative mortgage products people were sold in order to buy ever more expensive homes.' An estimated $1 trillion of these unconventional mortgages were expected to reset in the next 18 months, 'and payment shock to such homeowners would be severe if not financially fatal,' McGee said."

"In Florida, rising foreclosure activity may be a sign that property flippers who bought at the peak of the market 'were simply walking away from houses they were unable to sell at a profit,' reported. About 8,500 properties in Florida went into foreclosure in June, McGee said, and the use of 'creative mortgage products' may have contributed to the rise."

"'Now, price appreciation has gone flat and even reversed slightly and this trend is colliding with rising interest rates. People who bought at or near the market peak are being squeezed out of their homes and speculators find themselves trapped by rising costs and negative cash flows,' McGee stated."

"In Georgia, about 8,900 properties have already been lost this year through foreclosures."

"'As of mid August, more than 6,400 homes in Massachusetts are in foreclosure and over 3,800 have already been auctioned off,' said McGee. She pointed to rising interest rates combined with continued job loss in the region as primary factors contributing to the rising tide of defaults."

"'During the recent run-up in prices over the last few years east coast markets became severely overheated, especially in the Boston metro area,' said Ms. McGee. 'Prices there have declined about 4% over the last year,' said Ms. McGee. She added that the cooling market was also in part to blame for the increase in foreclosure activity. 'Our research has always found a correlation between slowing markets and rising foreclosures. People in distress lose the refinance option, and can no longer use their homes as ATM machines to raise cash,' said Ms. McGee."

"She added that foreclosures never completely go away, but that it takes a confluence of several factors to drive defaults off their historic baselines. 'That's what's going on in the northeast now. The hot market we saw over the last five years was just not sustainable and prices got completely out of whack with incomes,' she said."

"Mortgage defaults in the Chicago Metro area had risen sharply in the second quarter of 2006, increasing by 60% over the first quarter of the year. 'As of mid-August 17,467 homes were in some stage of foreclosure in the Midwestern region that includes Chicago, Gary IN, and Kenosha in southern Wisconsin,' saidMcGee."

"She pointed out that one had to look at the foreclosure numbers per household in a community to see what's really going on. 'For example, Indianapolis IN is a much smaller city than Chicago, but one out of every 101 households in that city is in foreclosure. In the Chicago Metro it's one out of every 198 households.'"

"She added that Texas, while a very large state, is still part of the southern Midwest, and has the dubious distinction of having the largest number of properties in foreclosure in the nation at 16,965, with 12,377 homes already lost in foreclosure as of mid-August."


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