Five States Represent 66 Percent Of Foreclosure Activity
Bargain Network reported this week based on estimates that U.S. home foreclosures are on the rise. Foreclosures represent a growing opportunity for investors and first-time home buyers looking to enter specific markets. Foreclosure activity in September 2006 showed an estimated 103,000 properties entering some stage of the foreclosure process during the 30-day period. Five states -- Florida, California, Michigan, Texas and Colorado -- accounted for an estimated 66 percent of September's foreclosure filing action.
September figures, along with figures from July and August, show one new property entering some stage of the foreclosure process for every 1,122 U.S. households, up 14 percent compared to the second quarter of 2006. There are a few factors responsible for this recent increase in foreclosures. Many home owners have suffered higher-than-anticipated costs in the forms of growing interest rates and elevated energy expenses. Some have also expected the values of their homes to rise and had been relying on that projected equity to pay for pricier lifestyles.
"Rising interest rates and higher energy prices are making it especially difficult for homeowners who relied on home price appreciation to build equity and drew upon that equity to support their lifestyles," noted Tom Adams, President and CEO of Bargain Network. "This is a group that we see as most at risk for future foreclosures."
Florida and the western states have a high proportion of loans in which mortgage holders pay only interest, not equity on their properties, which can result in foreclosures when interest rates rise. Adams anticipates that foreclosure rates will stabilize, and that foreclosures will continue to be an attractive investment vehicle. He predicts, "A cooling economy and slower housing market [will] force some people who purchased real estate using sub-prime mortgages to default on those loans in the months ahead."
Florida had the highest occurrence of foreclosure movement in September with approximately 28,000 properties entering some stage of the foreclosure process, accounting for 27 percent of the overall nationwide foreclosure activity. With one new foreclosure filing for every 254 households, the state's foreclosure rate was over four times the national average.
California ranked second with approximately 17,000 foreclosures entering some stage of the foreclosure process, or one foreclosure for every 712 households in the state. The state's foreclosure activity represents a 37 percent increase from the previous month, and a 44 percent increase in Q3 compared with Q2.
Texas recorded nearly 9,000 foreclosures entering some stage of the process, or one foreclosure for every 920 households in the state. Colorado posted an estimated 7,000 foreclosure listings, or one foreclosure for every 266 households. While both Texas and California recorded high levels of overall foreclosure activity, Texas actually slowed down compared to last month, posting a 38 percent decrease in foreclosure activity, while Colorado accelerated slightly, posting a 13 percent increase in activity compared to last month.
Many States Continue to Post Significant Increases
Several states throughout the U.S. continued to show an increase in month over month foreclosure activity, some of which posted an increase during each of the last three months.
Kentucky's foreclosure activity increased by roughly three percent in September compared with August, bringing the number of foreclosure filings in the Bluegrass State to a monthly high of just over 900. This marks the third successive month in a row that the number of foreclosure filings has increased in Kentucky, bringing the saturation rank to approximately one foreclosure in every 1,900 households.
Missouri's activity also increased for the third time in as many months to a total of over 1,700 foreclosure filings in the month of September, a 29 percent increase over the previous month. As the 21st biggest state in the U.S. and the 16th most populous state, Missouri posted an estimated one foreclosure filing for every 1,750 households.
The foreclosure rate in Nevada behaved much like the rates in Kentucky and Missouri, whereby Nevada posted its third straight monthly foreclosure activity increase, and a 42 percent increase over last month's activity. Not all states, however, posted increased foreclosure activity numbers.
Arizona and Illinois both returned to lower foreclosure activity rates that were more consistent with rates that were seen at the onset of Q3, whereby Arizona leveled off in September, and Illinois decreased around 7.5 percent compared with August, but increased 12 percent compared with the June/July period.
And More to Come ...
Industry forecasters recently estimated that more than $200 billion worth of adjustable rate mortgages will "reset" at higher rates in 2006 and over $1 trillion will reset in 2007. This situation, compounded by the expected slowing of the economy and the housing market, which according the National Association of Realtors includes a growing inventory of unsold homes, may edge more homeowners into the foreclosure process.