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Foreclosure increases led by just four States and that’s great news!

The Mortgage Bankers Association (MBA) recently released a Press Release showing the figures for foreclosures across the continental USA were the highest in the organisation’s 55-year-long history of carrying out surveys.

The delinquency survey which the MBA carries out covers more than 44 million mortgages and it showed that the previous highest percentage of defaulting home owners recorded was in 2006 and it was 0.43%. This has now risen to 0.58% of all loans made.

Small as the percentage may be it shows that more than 286,000 loans entered the foreclosure process during the quarter in question.

You will ask me here, ok, where’s the good news? Well, gloomy as the figures may be they are actually pretty good because of all the States surveyed they all showed a decline in the overall number of foreclosures with the exception of states of California, Florida, Nevada and Arizona. In these four States foreclosures actually increased and they increased by a number large enough to actually make up for the dip in the other thirty-four States surveyed.

This means two things: 1. The dip in real estate is about to plateau and then we will see a steady incline as we head for the next growth period. 2. The increase in foreclosures in those four States is also a direct reflection of the robust real estate market they had there and the fact that they simply had more people than any other State buy their own home and borrow money to do it.

There is clear correlation on this: According to the MBA report California has 17% of the sub-prime ARMs in the country and more than 19% of the foreclosure starts on sub-prime ARMs. California, Florida, Nevada and Arizona have more than one-third of the country's sub-prime ARMs and more than one-third of the foreclosure starts on sub-prime ARMs.

What is probably happening is that we now are beginning to enter the phase where the number of foreclosures is reaching a plateau prior to the market picking up and the four States in question are still locked in the shake up that releases new properties into the market and corrects house prices through the foreclosure mechanism.

The million dollar question is, of course, just how close are we to the end of the real estate market’s woes. Hard to tell. There are still figures coming through which may represent the tail end of foreclosures but that tail end could be both quiet substantial and prolonged. There are other factors affecting foreclosures and defaulting such as the ability to create new jobs in the economy and if that shrinks it affects home owners.

Overall we can see there is now light at the end of the tunnel and that is great news indeed. What we are not sure of yet is how long the tunnel is.