Painful as it is, the housing market is gradually moving toward a bottom with foreclosures leading the long, forced march.
Last week the National Association of Realtors reported that existing home sales declined again as the number of homes for sale continued to rise. Roughly one-third of the existing home sales for the second quarter were foreclosures.
This week, the OFHEO, a government agency, reported home prices registered another drop in May over the same time last year.
RealtyTrac reported that 220,000 homes in the second quarter were chalked up to foreclosure filings, which include default notices, auction sale notices and bank repossessions. That's a 121% increase from the same period in 2007. That’s a tough nut to swallow under anyone’s scenario.
Although most states registered an increase in foreclosure filings over 2007, the “hot spots” for foreclosures are so intense as to absorb a substantial portion of the overall foreclosure numbers. The overall downward pressure from foreclosures creates a negative push on home prices on a national level, but the areas with less foreclosure pain will enjoy greater price stability and continued reduction in inventory levels in both new, existing, and distress-class sales.
The Wall Street Journal reports that analysts at Barclays expect the overall foreclosure total to rise 60% before peaking in late 2009. If that prediction is true, this will be the ugliest year in real estate annuls but it could mean the bottom is in sight.
The WSJ writes that a housing market is considered "roughly in balance when the number of homes listed for sale is enough to last about six months at the current sales rate. Based on the average sales rate over the past year, The Wall Street Journal survey shows that supplies are enough to last about 13 months in the Atlanta and Phoenix areas, 15 months in Chicago, 19 months in Las Vegas, and 37 months in Miami-Fort Lauderdale. For condominiums alone in Miami-Dade County, the supply is enough to last 51 months."
BusinessWeek working with Case-Shiller data from Moody’s came up with 20 states where the largest share of foreclosures and other distressed sales made up the largest share of existing home sales.
Where the news was bad, it was really bad. No surprise that California came in at the top of the list with a staggering 41 percent of existing home sales made up by foreclosures in the second quarter as compared to 9 percent in last year’s same time period.
Nevada did not fare much better at 40 percent. Arizona and Florida as part of the regular foreclosure parade were in the top 10. But it is the colder climate states that are taking foreclosure hits on the chin, and as fall approaches it looks like the big chill will set in.
Here are the 2007/2008 foreclosure percentages of existing home sales tallied from the highest state rankings from the second quarter of both years:
California – 41% in 2008 VS 9% in 2007
Nevada – 40% in 2008 VS 11% in 2007
Connecticut – 27% in 2008 VS 12% in 2007
Michigan – 26% in 2008 VS 20% in 2007
Ohio – 26% in 2008 VS 20% in 2007
Florida – 25% in 2008 VS 6% in 2007
Arizona – 25% in 2008 VS 5% in 2007
Massachusetts - 24% in 2008 VS 8% in 2007
Maryland – 23% in 2008 VS 6% in 2007
Rhode Island – 22% in 2008 VS 9% in 2007
Minnesota – 21% in 2008 VS 11% in 2007
Maine – 20% in 2008 VS 10% in 2007
Colorado – 19% in 2008 VS 13% in 2007
Indiana – 19% in 2008 VS 17% in 2007
Kentucky – 19% in 2008 VS 12% in 2007
Illinois – 18% in 2008 VS 11% in 2007
Virginia – 18% in 2008 VS 5% in 2007
New Hampshire – 18% in 2008 VS 10% in 2007
Delaware – 18% in 2008 VS 10% in 2007
Pennsylvania – 17% in 2008 VS 13% in 2007