Foreclosure Tides Leaving Awash Indebted House Owners

A record number of houses in Southwest County fell to foreclosures in 2007 leading to a plunge in the real estate market. From October 2006 to September 2007 more than 26,000 mortgages defaulted. Every quarter the numbers continue to rise. Lenders are briskly seizing houses. In Southwest County banks own 1,900 houses – that is 28% of the houses on the sale list in the locality.

The lenders are now saddled with so many units that during the last six months they have been more than willing to cut prices so as to get back at least part of the loans in cash. This has further triggered a fall in real estate prices. The only silver lining is that now one can buy a house for cheap.

This fall in prices are drawing a motley crowd of buyers – novices, buyers trying to negotiate out of a bigger loan as well as professional investors. These buyers are doing one good thing. Previously houses had to wait on the shop shelves for more than four months but now they are being sold within two months. During the last three months the pace has picked up. But it is not enough.

The foreclosure crisis has left the construction industry in the doldrums with thousands being unemployed. Builders were dealing with 11,400 houses during the first 11 months of 2007. During the same time in 2006 and 2005 they had their hands full with 23,700 and 31,900 respectively. Experts opine that unemployment ripples will continue deep into 2008.

This foreclosure has been compared to a massive hangover from the housing boom partying going on till 2006. Buyers had over reached themselves, got into expensive houses being confident that the prices would continue to rise and so would its equity. They could then refinance and move into safer loans. But sale prices began to flatten from 2005 and then fall – spelling disaster to many.

A bad habit of borrowing and consumerism has gnawed into the core of society leaving families awash and astray. Now the tell tale signs are everywhere – sales are dropping in home improvement and furniture shops. New car dealers are among the worst hit. These groups contribute a sizeable chunk to the budget. So far consumers had been splurging because the hitherto booming housing market had given the house owners a false sense of being rich.

The foreclosure crisis has been a harsh lesson – a bitter pill remedial for the future.