Foreclosure Homes, a Bane to the Housing Market

First American CoreLogic, a research firm, has released its report showing the effect of the increase in rates of foreclosure homes in the housing industry.

According to First American, the number of foreclosures homes is expected to continue its rapid ascent as 20 percent of homeowners owe mortgages more than the fair market value of their distressed properties.

As of December 2008, over 8.3 million homeowners owe mortgages that exceeded the fair market value of their properties. For the last quarter of 2008, 18 percent of distressed homeowners’ mortgages exceeded the prices of their properties. This trend led industry experts to predict that the rising rates of foreclosure homes will continue to usurp whatever progress that have been made to boost the housing market.

First American senior economist Sam Khater noted that the abundance of foreclosure homes, particularly in Arizona, California, Florida and Nevada, drove prices of real estate properties in December 2008.

California is still the leading purveyor of foreclosure homes, with 14,351 as of January 2009. It is followed by Florida with 10,007 and Arizona with 5,250.

Nationwide foreclosures are pegged at 72,694, a drop of 25.7 percent from 97,841 in December of 2008.

California also ranked first in the volume of homeowners whose mortgages exceeded the market value of their properties, with 1.9 million facing the threat of foreclosure. It is followed by Florida with 1.3 million distressed homeowners, 497,000 in Texas, 459,000 in Michigan and 435,000 in Ohio.

According to First American, these five states accounted for over half of the negative equity mortgages in the country.

First American noted that about 2.2 million distressed homeowners are potential candidates for the refinancing program under the foreclosure prevention plan of President Barack Obama.

The foreclosure prevention plan is expected to help borrowers who are struggling to meet their mortgage payments to refinance their loans to allow them to pay lower mortgages.

Any homeowner whose mortgage exceeded the market value of his property may qualify for refinancing, where monthly loan payments would be lowered to 31 percent of his gross income.

First American predicted that the biggest increase in the number of homeowners whose mortgages exceeded the market value of their distressed properties will come from states that have not posted big decline in home prices, such as New Jersey, New York, Hawaii and Montana.

Joseph Smith has been educating buyers on the finer points of distressed properties purchase at FindForeclosureProperties.com for over five years. Click here to visit and read more advice on finding foreclosure properties by state.

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