Foreclosures at 1% – that’s all?

I’d like to start out with a big HUH?????? I don’t get it. Why is there so much doomsday talk about the mortgage foreclosure rates? The first quarter rate of foreclosures for 2008 was at a 30 year high. Know what that 30 year high rate was? Hang on to your hat****** .99% of new foreclosures. (beat) That’s right, a whopping less than 1%! So, why the cause for such alarm? Don’t we have enough real things to be scared of? World hunger? Terrorism? Global warming? Those are all things I’m afraid are going to have an impact on the lives of children, mine or the world’s at large. But, less than 1% of mortgages going in to foreclosure? Hmmm
So, I did little research. These numbers are generated from the Mortgage Bankers Association who reports somewhere between 2%-5% of mortgages overall being in foreclosure. These numbers being widely disseminated in the Washington Post, Reuters and our own Star-Tribune.
That means somewhere around 95% of mortgages are NOT in foreclosure. Isn’t that the good news?
Let’s look at the trends in the real estate and mortgage industry from 1999-2005. In 1999 the real estate market started warming up considerably, which generated a boom with multiple offers on many properties. Those multiple offers resulted in substantial increments of price increases over those 6 years. Couple that with the decline of mortgage interest rates and real estate was not just win/win for owner occupants but investors as well. Thus, 2000-2002-record sales/record mortgages, 2003-record sales/record mortgages AND the refinance boom that had folks waiting in lines around the corner to get their new mortgages, 2004-record sales/record mortgages, 2005-first half still climbing, second half level off. So, we’ve got record real estate sales and record numbers of mortgages for the better part of 5.5 years.
Think about it, record amounts of loans, record amounts of foreclosures. See a pattern here? Some of those foreclosures are because of buyers getting in over their heads (i.e. trying to buy too much house without sufficient financial wherewithal, relying on being able to refinance, etc.). But, much of the reason for the foreclosures is also because of fraudulent activities on the part of many real estate investors. A very prominent scam was illuminated here in the Twin Cities this year. That fraud caused foreclosures for some 130 or more houses in one Minneapolis neighborhood alone!

Long story short, we have record NUMBERS of foreclosures because of the record NUMBERS of loans created in the period between 1999-2005. But, overall, even though the percentages are being reported as high, they are less than 5%! I just get really honked off when the media has the ability to panic people instead of illuminating. With the drop in real estate prices and the ability to bargain on prices, it’s the best market we’ve had in a long time. Where is that good news being reported? I’ve often told my clients, by the time the media reports a turn around in the market, it’s already happening. The time to get in there is NOW. The water’s really fine, but it’s going to get a lot warmer soon, so get in while the gettin’s good!

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4 Responses to Foreclosures at 1% – that’s all?

  1. Hi Susan- My name is Danielle Drahos. I really like what you are saying and doing here, I couldnt agree more.

  2. MagicBrad says:

    Home Ownership is still a great INVESTMENT. For home improvement tips, ideas and resources there are the home expos by http://www.MediaMaxEvents.comCanterbury Park – ShakopeeeNational S;ports Center – Blaine

  3. Hi, Danielle!What’s your skin in the game? Are you in the business in some way? In any event, I thought it was time we started speaking up to give a different perspective instead of remaining silent while chicken little says the sky is falling.

  4. Foreclosure says:

    Hey!Your blog is nice. Thanks for sharing this information.

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