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Home Foreclosure Surge

Posted By Barry Ritholtz On February 27, 2006 @ 10:38 pm In Consumer Spending,Data Analysis,Economy,Real Estate | Comments Disabled

Final post of today’s [1] Real [2] Estate [3] marathon [4]:

"LAST WEEK, RealtyTrac published its January U.S. Foreclosure Report. According to the company, the report includes homes in all three phases of foreclosure: pre-foreclosure (notice of default), foreclosure (notice of sale) and real estate owned (properties that have been foreclosed on and repurchased by a bank).

In January, 103,540 homes were in foreclosure, up 27% from 81,290 in December and 45% above last year. January’s foreclosure total was the highest level since RealtyTrac began releasing monthly reports in May 2005."

Pretty crazy, right? Well, he’s the real shocker:  Even though foreclosure activity is accellerating, at 0.7%, its still below the long term trendline of 1%.

"January’s 27% increase in foreclosures is consistent with the increasing foreclosure trend seen throughout 2005. In total, nearly 847,000 properties entered foreclosure in 2005, representing 0.7% of total households. This is still below the historical average of approximately 1%, according to RealtyTrac."

What’s the basis of this increasing foreclosure trend?  Take a wild guess:

"In our opinion, the recent sharp increases seen in foreclosures are indicative of the heightened leverage taken on by home buyers through the past several years of robust price appreciation and record-low interest rates.

In addition, we expect the proliferation of adjustable rate mortgage (ARM) and interest-only mortgage products tied to the short end of the curve to provide an additional headwind as short-term interest rates continue to increase. For 2006 year-to-date, on average, the one-year ARM is 132 basis points higher than last year."

Nothing to see here folks, just move along . . .


Foreclosure Surge Indicates Home Stretch [5]
Ivy L. Zelman
Credit Suisse First Boston, FEBRUARY 27, 2006 2:56 p.m.


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2006/02/home-foreclosure-surge/

URLs in this post:

[1] today’s: http://bigpicture.typepad.com/comments/2006/02/greg_ip_discove.html

[2] Real: http://bigpicture.typepad.com/comments/2006/02/new_homes_sales.html

[3] Estate: http://bigpicture.typepad.com/comments/2006/02/home_prices_dec.html

[4] marathon: http://bigpicture.typepad.com/comments/2006/02/home_foreclosur.html

[5] Foreclosure Surge Indicates Home Stretch: http://online.barrons.com/article/SB114105560291284313.html.

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