August Foreclosures at All-time High as House Prices Drop

Foreclosures in August hit an all-time high as housing prices continue to drop making it difficult for homeowners to refinance or sell their properties.

Worst Housing Slump Since 1930s

303,879 property owners received last month notices of pending auctions and defaults or were foreclosed.  This was the highest recorded since reporting started in 2005.  A 27 percent increase in the number of filings was also recorded compared to the same period last year.  The sharp increase was attributed to the high default totals set last month.

The US housing slump, its worst since the 1930’s, showed no signs of letting up.  Prices of homes in the metropolitan cities of the US dropped 15.9 percent in June compared to statistics a year ago.  According to Lehman Brothers Holdings, US house prices could still go down by another 10 percent through the last quarter of 2009.  

In May, 273,001 filings were recorded but the August figures were higher by 11 percent.  Since July, filings shot up registering a 12 percent increase.  

August filings were 11 percent higher than the previous record of 273,001 set in May, according to RealtyTrac. Filings rose 12 percent from July. Bank seizures, the last stage of the foreclosure process, known as real estate-owned or REO properties, more than doubled from a year ago to 90,893.

Defaults rose 10 percent and auctions rose 7 percent from August 2007, said RealtyTrac, which has a database of more than 1.5 million properties.

Oversupply of Houses

According to the National Association of Realtors, the number of unsold single-family homes already reached 3.9 million.  This is the biggest ever recorded since 1982.  The supply of unsold homes stands at 11.1 months. This is a significant increase from the figures last September 2005 which stand at 4.6 months.

Borrowers are now required to put up 20 to 30 percent of the entire purchase amount.  Obtaining financing is getting very difficult for home owners according to Mark Goldman of Windsor Capital Mortgage.  90 percent of borrowers from Windsor Capital get 30-year loans at fixed interest rates.

The recent federal housing law designed to help home owners overcome foreclosures was seen as a contributing factor in slowing down the rate of defaults and auctions.  

Nevada, California, Worst Hit

The state of Nevada has the highest rate of foreclosure as one in 91 households has gone into default for the past 20 months.  Filings also increased by 16 percent from last month and 89 percent from the previous year.  The total number of filings from Nevada was recorded at 11,706.  

In California, defaults increased by 40 percent compared to the previous month as the year-to-year comparison also showed a 76 percent increase.  A total of 101,724 filings were recorded as one in 130 households face foreclosure proceedings.