For more than six months I have been commenting on what's happening in the residential real estate market and the news seems to only get worse overall. This new grim statistic means that there will be continued downward pressure on home sale prices and further drops in the market values of homes which in turn will leave even more homeowners with no equity and loan balances that significantly exceed what they can realistically hope to get if they are lucky enough to find a buyer. Given this fact, such homeowners have the choice of (1) walking away from the property or (2) trying to negotiate a "short sale" whereby the mortgage lender agrees to accept a less than full payoff amount and hopefully avoid having to take the property to foreclosure sale where no buyer is willing to pay enough to retire the loan in full.
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The benefit of a "short sale" is that the lender does not end up owning a property which it cannot sell, yet must maintain and pay taxes on. For the homeowner, provided the motgage lender will waive seeking a deficienct judgment, a "short sale" may provide a way to start over. I have a whole article and information and form packet on short sales (anyone interested in a copy should e-mail me). Until housing begins to recover, no one should expect the economy to turn around. Here are highlights from CNN:
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NEW YORK (CNNMoney.com) -- More than one million homes are now in foreclosure, the highest rate ever recorded, according to a trade group which warned Thursday that number will continue to climb.
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The seasonally-adjusted rate of homeowners behind on their mortgage payments also hit a record high. Nearly 3 million home loans, or 6.4%, have missed at least one payment, while about 737,000 are at least three months past due, but not yet in foreclosure.
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"It's the same story we've been seeing for a while now - we had too much reckless lending, and buyers who got over-extended," he said. "We've had an unprecedented decline in home prices on a nationwide basis, which is public enemy number one for mortgage loans. And now you've got an overall economy that has slowed adding to this toxic stew."
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Prime fixed-rate loans, which are considered very low risk, have also seen sharp increases in their delinquency and foreclosure rates, although they are performing far better than the riskier loans on the market. The report showed about 1.2 million prime mortgages are now a month or more past due, a seasonably adjusted rate of 3.7% of those loans. That's up from a rate of 2.6% a year ago.
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Nearly half of the homes in foreclosure are concentrated in six states. But those states are undergoing two very different types of housing meltdowns. California, Florida, Arizona and Nevada have been hit by a hangover after a home building boom in the middle of the decade, which was fueled by rising home prices and investors snatching up real estate using risky mortgages. Those four states have nearly 400,000 homes in foreclosure, or a third of the nationwide total. Roughly 3.6% of all of the loans in these states are now in foreclosure. "Clearly things in California and Florida are going to get worse before they get better," said Brinkman. The other two states that are ground zero for the crisis - Michigan and Ohio - have been hit by the more traditional economic woes stemming from rising job losses, particularly in the automotive sector.
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