Unemployment Worsens Real Estate Crisis

July 22nd, 2009 | by admin |

Recently, foreclosure news around the country were showing improvements as the number of households in the US facing foreclosures has lowered in May from April, and in 3 years, the average annual increase recorded the lowest.

We should see an improvement in the housing market if risky mortgages are the only reason for the downfall. However, this is not the case. The rate of unemployment across the country is rising to an alarming level making borrowers unable to keep up with their mortgages and results to default. This is what experts see as the main reason why we would like hear more foreclosure news this year and into 2010.

According to RealtyTrac Inc., foreclosure filings in May fell 6 percent from April. This equals to more than 321,000 foreclosure notices sent to homeowners or 1 in every 398 US homes; a number that is 18 percent more than the previous year and is the lowest recorded annual gain since 2006. Despite the drop, it is still considered as the 3rd highest monthly rate since January 2005.
When Fannie Mae and Freddie Mac, two of the major finance companies, temporarily halted the foreclosures, the mortgage industry has started to crack down on borrowers who were not able to pay their debts. The temporary stoppage may also be a reason why there is a drop in the number of foreclosure filings last month.

A $50 billion plan was announced by the Obama administration in March to provide assistance to troubled homeowners to have their mortgages undergo modification by the lenders. Due to the uncertain role of the lending industry in the plan, no apparent improvements or differences were noticed.

Banks usually put foreclosed homes up for sale with huge discounts to lure buyers. In April, sales of foreclosed homes as well as other distressed properties made up about 45 percent of the market.

The number of foreclosure filings varies from state to state with Nevada having the highest rate followed by California, Arizona, Utah, and Michigan on the top 5. It is noted that these states have also recorded high unemployment rates recently. In effect, as the number of jobless people goes up, foreclosure filings would likely rise.

As we tackle more foreclosure news, we notice that it is not only mortgages that cause further breakdown to the market, but unemployment as well. Hopefully, the government would find ways soon enough to address this problem.

Other articles you might like...

Post a Comment