Foreclosures Per Capita | February 2010

According to foreclosure-tracking firm RealtyTrac, foreclosure filings topped 300,000 for the 12th straight month last month as 1 in every 418 U.S. homes received a foreclosure filing.

It's a small improvement from January and a just 6 percent increase over February 2009.

On a per-capita basis, foreclosure density varied by state:

• Nevada : 1 foreclosure filing per 102 homes
• Florida : 1 foreclosure filing per 163 homes
• Arizona : 1 foreclosure filing per 163 homes
• California : 1 foreclosure filing per 195 homes

Also, as in January 2010, foreclosures across the country were concentrated. 10 states beat the national Foreclosure Per Capita average; 40 states fell below. Like everything else is real estate, it seems, foreclosures are local.

For today's Palmyra home buyers, foreclosures represent an interesting opportunity.

Homes bought in various stages of foreclosure are often less expensive than other, non-foreclosure homes. It's one reason why distressed home sales account for 38 percent of all resales. However, less expensive doesn't always mean less costly. A foreclosed home may be in various stages of disrepair and they're often sold as-is, as policy.

Buying new or used in Philadelphia or surrounding counties can be cheaper than buying broken-down. Buying foreclosures is attractive, and I've been selling bank owned properties since 1988, but you can create a problem for yourself if you chase the "deal" instead of looking for the house that suits your needs.

Therefore, if you're in the market for a bank-owned home, make sure you know what you're buying before you sign a contract. Have qualified professionals review and inspect the property, as needed. Damage to pipes or the property's structure, for example, may not be so obvious on a walk-though and you'll want to know about it before you buy. If you want to look at foreclosure properties, just visit our website.

Also, foreclosed homes are federal tax credit-eligible. Buyers must be under contract by April 30, 2010 and closed by June 30, 2010.

The True Picture: Half of all Foreclosure Issues in Only Four States

Foreclosures stories dominate the national housing news. It seems at least one foreclosure-related story makes its way to the front page or the nightly news every week.

But for as much as the foreclosure filing statistics can be astounding -- over 300,000 homes were served last month alone -- the prevalence of foreclosures depends on where you live.

As reported by RealtyTrac, just 4 states accounted for more than half of the country's foreclosure-related activity last month.

• California : 22.7 percent of all activity


• Florida : 14.9 percent of all activity


• Arizona : 6.7 percent of all activity


• Illinois : 5.7 percent of all activity

The other 46 states (and Washington D.C.) claimed the remaining 49.9%.

However, just because foreclosures are concentrated geographically, that doesn't make them less important to homebuyers in Philadelphia, Palmyra and around the country. There's been more than 1.4 million foreclosure filings in the last 12 months and that's a figure that can't be ignored.

Distressed properties now play a role in one-third of all home resales.

Therefore, if you're in the market for a foreclosed home, here's a few things to keep in mind.

1. Properties are usually sold "as-is" and may not be up to living standards. Be sure to physically inspect the home before buying it.


2. Buying a home from a bank is rarely as streamlined as buying from an individual homeowner. Be prepared for delays and long closings.


3. Foreclosures aren't always listed for sale publicly. Ask your real estate agent how to access the complete foreclosure inventory.

In order to use the federal homebuyer tax credit, you must be under contract for a home by April 30, 2010 and closed by June 30, 2010. That doesn't leave much time to find a bank-owned home and make it to closing. In Philadelphia we also face specific issues regarding the time needed for settlement because the deed obtained from the foreclosure sale often takes a longer time to record than in other counties. So if you're serious about buying foreclosures, it's probably best to start your search soon.

Housing Starts Post 8th Gain in 9 Months

Housing Starts on single-family homes gained last month, marking the 8th time that's happened this year.

A "Housing Start" is a home for which the foundation has been excavated and, considered alongside other key market metrics, September data suggests that the housing market stabilization is complete.

Momentum in housing is overwhelmingly positive:

• Homes under contract are soaring
• National home supplies are way down
• Home values are up in a lot of markets

Despite the positive news, the press is calling September's Housing Starts data a "bummer". Citing a drop in monthly building permits, the media purports that housing will slow in the months ahead.

The conclusion may be right, but the rationale may be wrong.

The probable cause for fewer permits isn't that the housing market is overdone. It's that home builders are choosing to exercise caution given the pending expiration of the First-Time Home Buyer Tax Credit and a still-growing number of foreclosed homes.

It's unclear what housing demand will be beginning in December and the last present a builder wants for the holidays is an excess of inventory.

It makes sense that building permits are down, in other words. In our marketplace, where new homes are not the most significant part of the housing inventory, unlike primarily new home communities like areas of Nevada, a Florida, the increase or decrease of housing starts may be less significant in any case.

Looking back at February of this year, there's a host of signs that housing is on the path to recovery. Now, that path won't be a straight line and there's bound to be setbacks, but September's Housing Starts is not one of them.

Housing Starts are up 40 percent on the year. WHich does indicate that ate the very least we have passed the bottom of this contraction.

Three States Hold 50% of U.S. Foreclosures

Foreclosure-tracker RealtyTrac reports that the number of foreclosures nationwide rose 7 percent on a month-to-month basis last month.

However, 3 states dominated the foreclosure list, tallying more foreclosures between them than the rest of the country combined.

• California : 30.0 percent


• Florida : 15.7 percent


• Arizona : 5.4 percent

On a per-household basis, the states ranked 2, 3 and 4. Only Nevada's foreclosure rate was higher.

Now, we point out these statistics for two reasons.

The first is to remind you that foreclosures can be highly local. For all of the foreclosure-related stories that run in the papers and on TV, defaults make a much larger impact on home values in some areas versus others. In Pennsylvania for example, there are only 1 foreclosure for every 1030 housing units as opposed to New Jersey where there is one foreclosure for every 541 housing units, or the national average of one foreclosure for every 355 household units.

And, second -- foreclosures can represent a terrific buying opportunity. Not every foreclosed home is in pristine condition, but there is a plethora of affordable housing out there, suitable for first-time buyer, move-up buyers and investors, too. By buying a home after the foreclosure sale, all liens and encumbrances are removed, and the buyer will have title as clear and pristine as in any other type of sale. Title Insurance is still needed for the buyer's protection, but is normally provided at settlement.

Furthermore, as banks get better at disposing of foreclosed homes, the process of buying one isn't as challenging as it was, say, 12 months ago.

As part of its research, RealtyTrac.com catalogs a lot of foreclosed homes and lists them online. However, you may find it better to start your search with a local real estate agent that knows the foreclosure market.

So long as buying foreclosures is a high-touch process -- and it is a high-touch process -- you may want to have a human face and agent to guide you through it. To search for foreclosure properties , just check the Century 21 Advantage Gold Web site.

The complete RealtyTrac report is available online.

Philadelphia Foreclosures and the Pareto Principal

The Pareto Principle is a statistical concept most commonly known as the 80/20 Rule, and is commonly applied in a variety of situations. for example "20% of the salesmen make 80% of the sales" or put another way "20% of your efforts generate 0% of your results"

Iin other words 80 percent of the effects come from 20 of the causes according to this principal.

Apparently, the 80/20 Rule applies to foreclosures, too -- at least according to data compiled by foreclosure-tracking firm RealtyTrac.

Based on data from May, 11 states accounted for 80% of the country's foreclosure activity. The remaining 20% was spread across the 39 others.

That's 80/20 almost to the tee.

The disparity goes deeper that that, though. The top three states in RealtyTrac's list -- California, Florida, Nevada -- were home to half of May's foreclosure-related actions.

Clearly, foreclosures are concentrated in certain geographies, generally where the spike in the real estate market was the greatest. Put another way, the places with the greatest increases, saw the greatest decreases in price, and were subject to the greatest abuses in mortgage lending. As a result these states are seeing the largest amount of foreclosures

But, even in Pennsylvania,where we are not suffering from as difficult a market as other places in the country, foreclosures still impact us. This is because mortgage lenders are often national companies, lending in all 50 states.

When home loans go bad -- in any state -- lenders respond by increasing downpayment requirements and by adding new borrowing hurdles. If you've applied for a mortgage in the last 18 months, you've experienced this phenomenon personally.

On the other side, if you're a home buyer in a foreclosure-heavy state, you're finding terrific value versus several years ago. It's one reason why Existing Home Sales in the West Region are up by 19 percent from last year, for example.

50% of the Foreclosures in the US are in 3 States!

Since 2007, foreclosures have dominated real estate news. You can't turn on the news or open a paper without some foreclosure-related story.

But for all of the discussion, foreclosures continue to be geographically concentrated.

Adding up the latest stats from RealtyTrac.com, more than half of the country's foreclosure actions from March occurred in just 3 states -- California, Florida and Nevada.

Those 3 states represent just 19 percent of the nation's population.

Despite the local concentration of foreclosures, however, they remain a national problem. This is because mortgage lenders lend in all 50 states -- not just 3 of them -- so the impact of mortgage defaults in one region can quickly spread to others.

In part because of foreclosures are higher, the following has happened:

• Mortgage guidelines have tightened
• Downpayment requirements have increased
• Private mortgage insurance has become more expensive

That's an important set of changes for a would-be borrower. In some cases, it can keep a person from qualifying.

Search the March 2009 foreclosure report for yourself on RealtyTrac.com's website.

How Mortgage rates Help You buy More House!

Image by woodleywonderworks via Flickr

Comparing July's conforming mortgage rates to today's average rates, there's a 1.5 percent difference in favor of homeowners.

Rate drops like that make big differences in a household budget. Look at these before-and-after payments, based on rates from the chart:

$150,000 mortgage ($144 savings/month)

• July 2008: $958 monthly
• February 2009: $814 monthly

$250,000 mortgage ($240 savings/month)

• July 2008: $1,597 monthly
• February 2009: $1,357 monthly

$350,000 mortgage ($335 savings/month)

• July 2008: $2,235 monthly
• February 2009: $1,900 monthly

Of course, the other side of the story is that while mortgage rates fell through late-2008, the mandatory lender fees that accompanied them rose. That lessened some of the benefits of getting lower rates, but certainly not all of them.

According to recent housing data, buyers are back writing contracts and listed homes are selling quickly. Considering how mortgage rates have led monthly payments lower, maybe it shouldn't be much of a surprise.

(Image courtesy: The Wall Street Journal)