Are the Federal Government and Lenders Out to Destroy Housing?

The Virginian Pilot is reporting that in March 43% of home sales were foreclosures. This reality has several negative side effects: (1) neighborhood values are driven lower thus causing more homeowners to be "underwater" on the mortgages and (2) the bailout tab to the taxpayers increases. Yet these effects would seem to be the agenda of the federal government and the lenders as a whole. Why do I say this? Because lenders continue to refuse to enter into loan modifications to assist owners faced with plummeting prices and/or financial catastrophes that have impacted their ability to pay on loans. This refusal ultimately leads to a foreclosures sale where huge numbers of homes are taken back by lenders because no one buys the home at foreclosure. The next step is to have the foreclosed homes under the management of incompetent "management companies" where they languish until the home is transferred to HUD, Fannie Mae or Freddie Mac. Once the homes become the property of these government or semi-governmental agencies, they typically sell for 40-50% of their former value. One doesn't need to be a math genius to realize how devastating this is to neighborhood values. The best solution for troubled homeowners and the taxpayer would be for loan modifications to be widely utilized. The fact that they are not shows just how f*cked up the system has become. Here are some story highlights:
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Sales of foreclosed and distressed properties continued to fuel the housing market in South Hampton Roads in March, according to a report released Monday. Real Estate Information Network Inc. reported that 1,090 homes sold last month in the area, up 56.4 percent from February and 13.2 percent from a year ago. Three of every seven homes sold - or 43 percent - were bank-owned or were sold for less than the seller owed on the mortgage.
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That is the highest volume of foreclosures sales on record, up from 42 percent in February.

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As such sales increase, housing prices continue to fall. Last month, the median price of homes sold dipped to $175,000, down 5.4 percent from February and 15 percent from a year ago, the Virginia Beach-based multiple listing service reported.

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Vinod Agarwal, an economist at Old Dominion University, said that although foreclosures make up a small percentage of the housing market, they are selling fast because of the perceived value. "If you think you're getting a steal, you go for it," Agarwal said.

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Despite foreclosure sales, the market as a whole is still swollen with properties. Last month, 14,360 were for sale in Hampton Roads, up 1.3 percent from February and down 3.4 percent from a year ago. That represents about 10 months of inventory. Six months of inventory is considered normal.

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It's also taking longer to sell a home, on average. The average number of days a home stays on the market rose slightly in March to 107 days. That is the lengthiest average market time in more than four years.