Foreclosures Touch Record Peaks In Third Quarter

Posted in Foreclosures, December 10th, 2007 |

Mortgage Bankers Association announced that during the third quarter of this year foreclosures have reached an all time record peak since 1986. Economist Campbell speaking with staff writer of Newsday, Wagner, said that this will have a wide impact on the general economy. It will affect all house owners and not just those branded as foreclosures. He is however optimistic that by the following year the real estate market will get back on its rails. Housing market is tossed around by several factors.

The foreclosed house usually ends up in the court auction. The lenders, who are usually the banks, do not want to sit on these units. That is why the banks are not motivated by high price. They are willing to settle for low prices and this tends to push down the general real estate market. There are more houses in the market than ever before – thanks to foreclosures.
The general story in the housing market is that for every buyer there is a seller. When a buyer sells a unit he or she usually does so to buy another house. But in the case of foreclosure an owner in distress is selling the house. A loan is being paid off. This does not leave anything left over for buying another house. Thus too many foreclosures lead to imbalances with the supply being more than the demand. This causes prices to go down and has far reaching implications for the economy starting with the immediate locality.’ For Sale’ signs dotting the region make the neighbourhood looks eerie and abandoned. Criminal activity sets in. Nature hates vacuum. With development pausing, labourers and builders find themselves without work. Suppliers and others connected with house décor suffer. It sets of a chain reaction that touches adversely each corner of the regional society and economy.

However the housing sector will recover opines the esteemed economist. There is a silver lining in the cloud. The sub-prime sector in the mortgage industry might be in the red but the prime category is still alive and kicking. It means that those with reasonable levels of income and can invest in a small down payment can still avail of housing loans. By next year things may stabilize although it is unlikely that there will be a housing boom again. Unless there is a general economic recession the market will become healthy once more.