Prices Tumble in August as Foreclosures Surge
Oct 24 2008
By Kathleen M. Howley and Dan Levy
prices tumbled the most in at least 17 years in August and
foreclosures increased to the highest on record, reducing
property values as the global credit crisis weakened the
economy, according to reports today.
Home prices dropped
5.9 percent from a year earlier, the biggest decline since
1991, when the Federal Housing Finance Agency data starts.
Foreclosure filings increased 71 percent in the third quarter
from a year earlier, according to Irvine, California-based
RealtyTrac, a seller of foreclosure data.
The surge in
home foreclosures is dragging down real estate prices in
neighborhoods across the U.S. as houses are sold at foreclosure
auctions. A recession that began in the third quarter is
deepening the housing slump and adding to mortgage defaults
as companies shed jobs, according to Jay Brinkmann, chief
economist for the Mortgage Bankers Association.
living paycheck to paycheck are at risk if they lose their
jobs,'' said Rick Sharga, executive vice president for marketing
at RealtyTrac, said in an interview. ``It will cause more
people to lose their homes.''
Stigma on the
cuts the value of all surrounding homes by a total of about
$220,000 as it stigmatizes the area and sells at a discounted
price, according to the Federal Deposit Insurance Corp.
At the end of June, U.S. banks held $9.9 billion of foreclosed
properties, up from $8.5 billion three months earlier, according
to an FDIC report. Every three months, another 250,000 homes
enter foreclosure, the report said.
A total of 765,558
U.S. properties got a default notice, were warned of a pending
auction or were foreclosed on in the quarter, the most in
records began in January 2005, RealtyTrac said.
12 percent in September from August as state laws created
to keep people in homes slowed the pace of defaults. In
North Carolina, default notices fell 66 percent after lawmakers
required lenders to give homeowners an additional 45-day
notice, the RealtyTrac report said.
September, one in every 475 U.S. housing units received
a foreclosure filing.
a new law requiring lenders to meet with delinquent borrowers
before beginning the legal process of seizing a home caused
a 23 percent drop in default notices during the third quarter
after reaching a record in the prior three months, San Diego-based
MDA DataQuick said today in a separate report.
A prior measure
of August home prices, issued by the National Association
of Realtors in Chicago on Sept. 24, showed the U.S. median
sale price plummeted 9.5 percent in August to $203,100 from
$224,400 a year earlier, the biggest drop on record.
study included all homes sold, regardless of price, while
the federal study excluded properties purchased with mortgages
higher than the so-called conforming loan limit. For most
parts of the U.S. that maximum is $417,000, though Congress
voted in February to temporarily raise the cap to $729,750
in some high-cost markets.
The volume of
new mortgages used to purchase homes will drop to $911 billion
this year from $1.14 trillion in 2007, the Washington-based
Mortgage Bankers Association said in an Oct. 21 forecast.
The annual volume probably won't rise above $1 trillion
until 2010, the bankers group said.
The Federal Housing
Finance Agency was created three months ago from the Office
of Federal Housing Enterprise Oversight and the Federal
Housing Finance Board. The agency in September seized Fannie
Mae and Freddie Mac, the world's two largest mortgage buyers,
after a surge of foreclosures threatened to topple them.