The growing number of Americans losing their homes shows no sign of slowing. In March, nearly 235,000 properties across the country were in some stage of the foreclosure process, such as in default, up for auction, or repossessed by the bank.
That level of activity represents a 5 percent uptick from the previous month and a 57 percent jump compared to March 2007, according to RealtyTrac, which prepared the monthly report. "This is by all accounts a historically high level of foreclosure, and it's more likely to get worse than better," says Rick Sharga, vice president of marketing for Irvine, Calif.-based RealtyTrac.
He attributes such trends primarily to poor lending practices. "This is the first foreclosure cycle that wasn't predicated on economic crises. When the wave of foreclosures began in January 2006, we had low unemployment and a growing economy. This was built on the poor performance of the loan products in use."
And, despite the much discussed presence of speculators and their impact on housing's boom and now bust, the majority of properties in foreclosure are owner-occupied homes, according to Sharga. "Nobody keeps accurate data" for such situations, Sharga says, but RealtyTrac has compared property and owner tax addresses to come up with an approximate number. The firm estimates that 25 percent to 33 percent of properties in foreclosure (meaning they have not yet been repossessed by a lender) are not owner-occupied. That means that 66 percent to 75 percent of property owners in foreclosure are losing their homes, not a vacant property bought purely as an investment.
Ironically, but perhaps predictably, states that profited the most from the housing boom in terms of population growth and housing-related jobs are proving to be the hardest-hit in the crash as mortgage firms fold, developers sit tight, and builders unload land and inventory. That includes states such as Nevada, home to Las Vegas, long one of the country's hottest housing markets. According to RealtyTrac, 1 in every 139 Nevada households received a foreclosure filing last month, which is nearly four times the national average.
Other states dealing with the highest foreclosure rates in March include California, Florida, and Arizona, which also saw high levels of residential construction activity. "What we are seeing is the inverse of what we used to see," Sharga says. "We used to see unemployment drive foreclosure rates. Now we are seeing foreclosure drive unemployment."
The rising numbers of foreclosures means more bad news for builders that are already dealing with months of supply on the market. "There could be one million bank-owned properties within the year, which means there will continue to be inventory issues," Sharga predicts. "They will be selling for distressed prices, which really puts the squeeze on people."