Home Sales Rise 10% as Foreclosure Reviews Begin
Cited: AP/Reuters
The summer was the worst for the housing market in more than a decade even though previously occupied homes sales rose in September. According to the National Association of Realtors stated on October 25 that sales rose 10% in September for a seasonally adjusted annual rate of 4.53 million. Even so, buyers may be on the sidelines for the remainder of the year because of fears over flawed foreclosure documents.
Home sales have declined 37.5% from their peak annual rate of 7.25 million in September 2005. They have risen from July’s rate of 3.84 million, which was the lowest in 15 years.
Most experts expect roughly 5 million homes to be sold through the entire year. That would be in line with last year’s totals and just above sales for 2008, the worst since 1997.
Still, sales could fall further if potential lawsuits from former homeowners claiming that banks made errors when seizing their homes make consumers fearful of buying foreclosed properties.
The Federal Reserve on October 25 becomes the latest government regulator to announce it would be looking into whether mortgage companies cut corners on their own procedures when seizing homes.
Chairman Ben Bernanke said the Fed would look intensively to see if policies, procedures or internal controls led lenders to improperly foreclosure on homeowners. Preliminary results of an in-depth report are expected to be released next month.
“We take violation of proper procedures very seriously,” Bernanke said.
In a survey taken by the Realtors group this month, about 23% of the 2,000 agents surveyed said they have a client who is no longer interested in purchasing a foreclosed property due to the foreclosure-document mess.
“You’re going to see uncertainty on the part of homebuyers,” said Quinn Eddins, director of research at Radar Logic Inc., which tracks the housing market.
Mortgage applications to purchase homes last week were 29% below the same week a year ago, according to the Mortgage Bankers Association. At that time, buyers were rushing to purchase homes to qualify for federal tax credits.
Last month the inventory of unsold homes on the market fell about 2% to 4 million. That’s a 10.8% month supply at the current sales pace. It compares with a healthy level of about six months.
Dubious mortgage practices and lax lending standards were blamed for contributing to a housing bubble that eventually burst and thrust the economy from 2007-2009 into the worst recession since the 1930s. Many Americans took out home loans that they didn’t understand and bought homes that they couldn’t afford.
As a result, foreclosures have soared to record highs. It’s one of the negative forces restraining the economy’s ability to get back on sounder footing.
Now more than 20% of borrowers owe more than their home is worth, and an additional 33% have equity cushions of 10% or less, putting them at risk should house prices decline much further, Bernanke said.
“With housing markets still weak, high levels of mortgage distress may well persist for some time to come,” Bernanke warned.
Next month will see a report by US banking regulators on foreclosure practices at large financial institutions following allegations that lenders cut corners evict homeowners according to Ben Bernanke, Federal Reserve chairman, on October 25.
The review, which follows probes by all 50 state attorneys general and the Justice Department, adds further pressure to banks besieged by accusations that they failed to review foreclosure documents properly or submitted false statements when they foreclosed on properties.
“We have been concerned about reported irregularities in foreclosure practices at a number of large financial institutions,” Bernanke said in opening remarks to a conference sponsored by the Fed and the Federal Deposit Insurance Corp.
“We anticipate preliminary results of the review next month,” he said. “We take violations of proper procedures seriously.”
The controversy, which has drawn public outrage, has raised fears about bank earnings and the health of a fragile housing market, which has been battered by falling prices and foreclosures of nearly 3 million homes since January 2007.
According to Bernanke, the process of evaluating these effects is underway by the federal staff. Foreclosure moratoriums were triggered by evidence of import variety-the biggest US lenders. However, Bank of America and GMAC Mortgage has since retreated from these moratoriums.
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My Take: I have been watching the news very closely on the subject. My mother and I are trying to purchase our first home and I want to keep track of what’s going on. One thing I haven’t heard much on is commercial real estate loans. They only seem to keep talking about residential real estate. But, it seems only logical that commercial mortgage loans would be in the same fix as residential loans.
I have heard also that many people are utilizing real estate auctions in an attempt to get more for their property, especially those whose homes are valued below what they owe on it. Of course, most of the ones I have heard about are luxury auction listings that run in the millions of dollars instead of the 5-6 figures ones on the news.
Although I am not looking in that area, South Nyack real estate seems to be going at it a pretty good price. In my opinion, Nyack NY real estate is absolutely gorgeous. I may not be willing to move there, but I can always dream!
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