March is usually the month when people in the real estate business start getting hopeful. Spring usually brings out both buyers and sellers and, along with them, higher values for most homes.
But for some of the biggest housing markets in the country, those hopes look to be in vain this year. The problem is the glut of homes that have been repossessed by banks or that seem headed in that direction. The glut is far bigger than it was a year ago.
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In fact the outlook is flat-out grim, based on the latest data from First American CoreLogic, a housing data firm that tracks 97% of U.S. transactions for the mortgage industry. The percentage of homes that banks have filed foreclosure on or repossessed (and stamped with the dreaded "REO," or "real estate owned," moniker) now account for 3% of all mortgaged homes. That's up from 2.2% a year ago. In some large cities, the rate is two-to-six times the national average.
"The overhang is a dark specter over the housing market," says Sam A. Khater, senior economist at First American CoreLogic. There are now 3.5 million mortgages at least 90 days delinquent. In addition, 2 million mortgages are at least 180 days delinquent, says Khater. Unlike unemployment, the rise in delinquent mortgages hasn't decelerated, he adds.
The government's various efforts to keep most of these mortgage from being converted to REO have helped struggling homeowners remain in their homes, but most of the moratoria against foreclosures and the various federal programs aimed at supporting low-income borrowers are soon to end. "Then what?" asks Kahter.
Even tiny Bend, Ore., is in serious trouble, with 10.3% of its mortgages either delinquent or foreclosed on, up from 4.7% a year ago. Wasn't Bend one of those charming villages where people moved to escape high prices? Opt instead for Corvallis, three hours further east of Portland. Delinquencies there are a tame 1.7%