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National Real Estate Market Trends

According to a CNNMoney.com article, February 2009, real estate values around the nation have collapsed and sales of foreclosed and “underwater” homes now dominate many housing markets. A report by Zillow.com, said that nearly 20% of the nations home sales in 2008 were bank repossessed properties. Another 11% were short sales, in which homeowners owed more in mortgage debt than their homes worth. Because so many homes are worth less than their mortgage balances, an increasing number have to be sold short.

According to the Foreclosure Radar, California NOD’s jumped 103.46% for the year 2009 and foreclosures went up 41.74%.  California is ranked the 3rd worst state in the U.S. for foreclosures. These filings were up 6% in the first quarter versus the forth quarter and 79% over the first quarter in 2008.

HOW DID WE GET HERE?

The Distressed Property Institute feels our current real estate market is due in large part to the types of loans that were being written by just about every lender in the United States, namely the “Sub-Prime” or high risk loan.

Borrowers were allowed to gain mortgages that they were never qualified for. In fact, CNN Money contributor Les Chrisite details in his February 20, 2008 article “Sub Prime Loans Defaulting Even Before Resets” that of the loans written in 2007, none of which had reset at the time of the article, 11.2% of those loans had defaulted prior to a reset. this indicates that the borrowers could not afford even the low introductory rates offered in order to secure mortgages. Many of these loans were written at 90% or more of market value. The mortgage industry simply could not sustain this level of immediate losses against an over-leveraged portfolio and the downward spiral began.

THE COMBINATION OF THIS LENDING PRACTICE AND OVER PURCHASING CAUSED A NUMBER OF CONDITIONS:

  1. In many areas property values have plummeted.
  2. Home sales have continued to slow, driving real estate inventories to their highest point in 22 years.
  3. Money Magazine predicts that 1.4 million Americans will see their mortgage payments more than double in the next 5 years.
  4. By November 2007, over 63% of the sub-prime mortgages once available have disappeared and this figure continues to increase as more and more lenders exit the market completely.
  5. Many borrowers who may have the credit and income to refinance no longer have the equity in their properties due to the depreciation in their homes value.
  6. The decrease in the number of lending institutions has decreased the number of options that buyers have, making it difficult for those buying a home to qualify for financing.
  7. In many areas of the country, homeowners who have to sell are in the position of having to compete with builder closeouts, REOs and other distressed properties that are driving down values.

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