RealtyTrac: U.S. Foreclosure Activity Up 32% from July 2008 and 7% from June 2009

According to this RealtyTrac press release, U.S. FORECLOSURE ACTIVITY INCREASES 7 PERCENT IN JULY, in July 2009 US foreclosures increased by 32% from July 2008 and by 7% from June 2009. According to the press release, July is the 3rd time in the last 5 months that a new record has been set for foreclosure activity. Again, the 4 hardest hit states were Nevada, California, Arizona and Florida. However, there were a many other notable problem areas with Utah at #5, Idaho at #6, Georgia at #7, Illinois at #8, and Colorado at #9. Tennessee ranked 22nd (worse than average), while Pennsylvania, a more stable area, ranked 34th (better than average). A complete list of the July 2009 state by state foreclosure rankings are below (courtesy of RealtyTrac):

U.S. Foreclosure Market Data by State – July 2009

		Properties with Foreclosure Filings
Rate Rank	State Name	NOD	LIS	NTS	NFS	REO	Total	1/every X HU (rate)	%? from Jun 09	%? from Jul 08
--	U.S.	62,939	71,565	104,830	33,557	87,258	360,149	355	6.74	32.32
33	Alabama	0	0	1,630	0	452	2,082	1,026	-23.34	141.25*
24	Alaska	3	0	266	0	102	371	761	76.67	79.23
3	Arizona	2	0	14,120	0	5,572	19,694	135	16.99	47.52
21	Arkansas	104	0	1,319	0	828	2,251	572	35.03*	110.77*
2	California	50,917	0	35,802	0	21,385	108,104	123	6.99	49.55
9	Colorado	5	0	3,947	0	1,536	5,488	388	-4.12	2.08
29	Connecticut	0	1,084	0	190	295	1,569	917	7.84	-22.10
37	Delaware	0	0	0	226	72	298	1304	-12.61	125.76
	District of Columbia	267	0	219	0	35	521	546	24.94	-6.80
4	Florida	0	35,227	0	14,502	6,757	56,486	154	6.78	23.11
7	Georgia	1	0	7,616	0	3,519	11,136	356	-20.59	10.68
15	Hawaii	186	0	481	0	323	990	512	40.23	332.31
6	Idaho	1,290	0	1,051	0	150	2,491	253	32.43*	166.13*
8	Illinois	0	6,770	0	4,060	3,694	14,524	361	34.53	62.92
17	Indiana	0	1,015	0	1,881	2,290	5,186	536	-6.86	8.43
43	Iowa	0	0	227	0	374	601	2,212	7.32	20.68
30	Kansas	0	183	0	408	728	1,319	925	37.68	94.83
39	Kentucky	0	405	0	488	341	1,234	1,545	9.30	0.65
40	Louisiana	0	6	0	928	183	1,117	1,664	-23.07	9.83
41	Maine	0	138	0	212	57	407	1,712	39.38	59.61
11	Maryland	0	3,521	0	633	998	5,152	450	66.19	65.98
16	Massachusetts	0	3,548	0	1,049	517	5,114	532	58.77	43.09
19	Michigan	1	0	2,695	0	5,561	8,257	548	-39.32	-28.76
20	Minnesota	12	0	2,266	0	1,847	4,125	559	23.80	146.86
45	Mississippi	0	0	354	0	124	478	2,625	-36.69	151.58*
27	Missouri	5	0	1,729	0	1,441	3,175	834	2.02	-9.60†
47	Montana	0	0	2	0	88	90	4,839	45.16	-36.62
46	Nebraska	0	164	0	5	26	195	4,004	30.87	-70.45
1	Nevada	7,139	0	7,833	0	4,563	19,535	56	4.11	94.18
31	New Hampshire	0	0	611	0	12	623	954	42.24	-31.01
18	New Jersey	0	4,210	0	1,505	752	6,467	541	49.25	39.92
32	New Mexico	0	479	0	270	128	877	983	23.52	61.21*
38	New York	0	4,613	0	871	470	5,954	1,334	22.76	-3.45
36	North Carolina	1,120	0	756	0	1,552	3,428	1,203	7.97	-20.33
48	North Dakota	0	1	0	26	23	50	6,211	56.25	-23.08
12	Ohio	0	5,062	0	3,032	2,927	11,021	460	-2.05	-18.10
35	Oklahoma	595	0	522	0	420	1,537	1,056	18.69	-11.05
10	Oregon	29	0	2,463	0	1,113	3,605	446	15.80	84.40
34	Pennsylvania	0	1,869	0	1,805	1,642	5,316	1,030	7.59	27.36*
28	Rhode Island	0	0	17	0	488	505	893	-44.63	2.23
26	South Carolina	0	1,209	0	484	735	2,428	833	44.01	82.15*
42	South Dakota	0	60	0	56	48	164	2,178	45.13	446.67*
22	Tennessee	0	0	2,263	0	2,309	4,572	596	-2.20	0.15††
25	Texas	24	0	7,194	0	4,859	12,077	781	0.45	16.64
5	Utah	1,234	0	1,728	0	732	3,694	250	6.42	93.30
50	Vermont	0	0	0	0	11	11	28,312	0.00	120.00
14	Virginia	5	0	3,927	0	2,474	6,406	511	23.48	11.51†
13	Washington	0	0	3,632	0	1,738	5,370	511	14.79	94.42*
49	West Virginia	0	0	119	0	20	139	6,350	21.93	265.79
23	Wisconsin	0	2,001	0	926	890	3,817	671	8.10	86.74*
44	Wyoming	0	0	41	0	57	98	2,473	16.67	-26.32

* Actual increase may not be as high due to data collection changes or improvements
† Collection of some records previously classified as NOD in this state was discontinued starting in January 2009
† Collection of some records previously classified as NOD in this state was discontinued starting in September 2008

U.S. Foreclosure Rates Heat Map – July 2009

A US Foreclosure Rates Heat Map for July 2009 is below (courtesy of RealtyTrac). As you can see, many counties in Tennessee experienced high rates of foreclosure activity in July 2009. Although the map is small (and difficult to tell for sure), it appears that some of the hardest hit counties are Davidson, Williamson and Rutherford. Rutherford County TN appears to have one of the highest foreclosure rates in the entire the state of Tennessee.

After the RealtyTrac press release was issued, a Bloomberg article, U.S. Foreclosure Filings Set Third Record-High in Five Months, obtained additional information from the following real estate sources and experts.

• National Association of REALTORS (NAR) - The median price of an existing single-family house dropped 15.6 percent to $174,100 in the second quarter of 2009, the most in records dating to 1979.
• Zillow - Almost one-quarter of U.S. mortgage holders are now underwater (i.e. they owe more in mortgage debt than their homes are worth).
• Stuart Gabriel (director of the UCLA Ziman Center for Real Estate in Los Angeles) - “There are a slew of factors showing fundamental weakness on the demand side: tighter underwriting, job loss, investors who’ve been badly burned. We have not seen the bottom of the housing market.”
• Diane Swonk (chief economist at Chicago-based Mesirow Financial Inc.) - “We’re in a deep hole. There is a whole new wave of foreclosures tied to the cyclical dynamics of the economy. It has been more profitable to put a home in foreclosure than restructure the loan. The only thing that helps is forgiveness of principal, and there is little willingness to do that.”

The information above from RealtyTrac and the additional information and quotes are all proof that what I said several months ago is true: "The worst is yet to come." The real estate market is still declining and will actually accelerate downward starting in the summer of 2010. The major issues that will continue to harm the real estate market are as follows:

• Continued job losses.
• More and more homeowners underwater.
• Massive government debt which will result in higher interest rates.

There is no way to escape what is coming. All the events that will cause the impending declines have already happened.

4 Reasons the Recent Housing Upswing is Nothing More than a Temporary Slow Down on the Way to the Bottom

The current housing upswing in sales that is leading many clueless media pundits to claim the housing market bottom is near is noting more than a pit stop on the way to the bottom. I believe that this "upswing" is really a mirage. Below are 4 reasons why the real estate market is still headed down.

1. Low priced foreclosure sales are artificially inflating sales figures. However, don't take my word for it. According this Forbes.com article, America's Best And Worst Housing Markets, Stan Humphries, Zillow Chief Economist, states that "In many areas, low-priced foreclosure resales are boosting overall sales, which keeps overall home prices down."
2. Cyclic sales are distorting the sales volume and sales price figures. Don't believe me? That's fine. Listen to a real estate appraiser. "Prices are supposed to go up in the spring; they're seasonal," says Jonathan Miller, president of Miller Samuel, a Manhattan-based appraisal firm. "The seasonality is playing tricks on our eyes."
3. Government meddling is distorting the market. In addition to the normal spring bump in sales volume and prices, the $8,000 first time home buyer tax credit is artificially causing a higher level of sales, particularly on lower priced homes where $8,000 is a larger % of the sale price. Buyers are rushing to buy homes and close on the purchases before the tax credit expires on 11/30/2009. Again, don't rely on me. The same Forbes article quotes Stan Humphries, Zillow chief economist, as stating "Current trends may owe a lot to seasonality and the $8,000 first-time buyer tax credit. As such, current demand may not be based on sustainable market forces. With negative equity rates high and unemployment continuing to rise, we have likely not seen the peak in foreclosure rates."
4. More and more homeowners owe more than their homes are worth. According to the Deutsche Bank report mentioned in my recent blog post, SCARY STUFF: About half of U.S. mortgages seen underwater by 2011, 48% of homeowners will be underwater by 2011. The result of this will be that more and more homeowners will simply walk away from their homes as they give up on the notion that their homes will ever be worth what they owe.
   

SCARY STUFF: About half of U.S. mortgages seen underwater by 2011

According to this Reuters article, About half of U.S. mortgages seen underwater by 2011, a Deutsche Bank report states that "the percentage of U.S. homeowners who owe more than their house is worth will nearly double to 48 percent in 2011 from 26 percent at the end of March (2009)." According to the Deutsche Bank report, home price declines will affect "conforming" or "prime" borrowers (i.e. those that put 20% down, had documentable income and good credit" the most. The report goes on to state that 41% of prime conforming loans will be underwater by the first quarter of 2011, up from 16% at the end of the first quarter 2009 and 46% percent of prime jumbo loans will be underwater, up from 29%. The report goes on to state that 69% of subprime loans, will be greater than the underlying property value in 2011 (up from 50%) and 89% of option adjustable-rate mortgages (option ARM's), which artificially reduced payments by allowing payments to be lower than the interest due resulting in increasing principal balances, will be underwater in 2011, up from 77%.
In June 2009 Deutsche Bank covered 100 U.S. metropolitan areas and forecast home prices would fall 14% through the 1st quarter of 2011 for a total drop of 41.7%.

The Deutsche Bank reports stated that the regions suffering the worst negative equity are areas in California, Florida, Arizona, Nevada, Ohio, Michigan, Illinois, Wisconsin, Massachusetts and West Virginia. The report added that Las Vegas and parts of Florida and California will see 90% or more of their loans underwater by 2011.
The Deutsche Bank analysts stated that "For many, the home has morphed from piggy bank to albatross."
The Reuters article states that "the drop in home prices is fueling a vicious cycle of foreclosures as it eliminates homeowner equity and gives borrowers an incentive to walk away from their mortgages. The more severe the negative equity, the more likely are defaults, since many borrowers believe prices will not recover enough." (Translation: homeowners will walk away from their homes and give the keys back to the banks once they realize their homes will never be worth enough to pay off the debt.)

The above is more evidence that this housing market mess is far from over despite the nonsense you hear from the National Association of REALTORS (NAR) and the Obama Administration. There will be high numbers of foreclosures and short sales for years to come.

If you are a homeowner in Middle Tennessee who cannot pay your mortgage (due to losing your job, having your income reduced, illness, health problems, etc.), or your home is already in foreclosure, or you owe more than your home is worth, please contact me to discuss your options including loan modifications or short sales. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN. If you do need to short sell your home (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home), or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.

Fannie Mae Loses $14.8 Billion in 2nd Quarter of 2009

According to this Fannie Mae News Release, Fannie Mae Reports Second-Quarter 2009 Results, Fannie Mae lost $14.8 billion in the 2nd quarter of 2009. The news release states "Second-quarter results were driven primarily by $18.8 billion of credit-related expenses, reflecting the ongoing impact of adverse conditions in the housing market, as well as the economic recession and rising unemployment." Translation: loan defaults and foreclosures are killing them. Mark my words, this is only going to get worse.

Commercial Defaults Coming Fast and Furious

According to this Bloomberg.com article, Maguire to Surrender Buildings, No Bankruptcy Planned, Maguire Properties Inc., the largest office landlord in downtown Los Angeles, will give seven office buildings back to the lenders. The company has already given one of those buildings back to the lenders. They plan on giving the other six buildings back soon. According to the article the company told lenders "it will no longer continue to fund the cash shortfall" on the mortgages for the six buildings. Of the seven office buildings, two are already in default. The CEO of Maguire said that the company is not considering bankruptcy. According to the article, Maguire's decision is a sign that landlords in Southern California’s overleveraged office market can no longer make payments and may be forced to abandon properties.

In short, the real estate market is still in for a world of hurt in formerly fast growth areas such as CA, NV, AZ and FL. Rising commercial loan defaults will lead to large numbers of short sales and foreclosures. The coming ARM resets will cause even more problems. Together, they will wreak more havoc on the real estate markets across the US over the next 12-24 months. Only after these issues play out will we hit a true real estate bottom.

Great Blog Post: The Ridiculous Loan Modification Solution

According to this BrokerAgentSocial article, The Ridiculous Loan Modification Solution, Banks and Mortgage Lenders have no real incentive to offer struggling home owners a loan modification since a Barclay's study showed that "current loans receiving rate modifications will experience a 62% redefault rate and delinquent loans receiving rate modifications will experience an 83% redefault rate." The reasons that these loans will still go bad are simple:

1. The home owners were shaky from the beginning and so they are not the most financially responsible people to start with.
2. Their homes are worth far less than the their mortgage balances. Eventually these people realize that they will never "get even" and just give up by letting the go into foreclosure.

The result of all of this is that short sales are rely best solution for the lenders and the homeowners since it is statistically proven that loan modifications will not work. Regardless of what the all knowing Obama says, keeping people in their homes is not the answer to our real estate crisis. Letting the market hit bottom as soon as possible is.

98 of the Top 100 Metropolitan Areas Lost Jobs Over the Period of June 2008 to June 2009

According to this Nashville Business Journal article, 98 of top 100 metros suffer job losses, almost all major metropolitan areas lost jobs over the period of June 2008 to June 2009. New York City, Los Angeles and Chicago where the hardest hit with over 200,000 jobs lost. Atlanta, Detroit and Phoenix each lost over 100,000 jobs. The Nashville Metropolitan area (generally Nashville, Davidson County, Williamson County (Franklin and Brentwood) and Rutherford County (Murfreesboro and Smyrna) was in the middle of the pack with 32,800 jobs lost. All of this means more unemployed people with a result of more delinquencies, foreclosures (REO's) and short sales. the effect of this will be continued dampening of the real estate market.

Mortgage Servicers Have Incentives Not to Modify Loans, Not to Approve Short Sales and Not to Foreclose (At Least for Quite a While)

According to this New York Times article, Lucrative Fees May Deter Efforts to Alter Loans, mortgage servicers make more money by charging late fees, legal fees, insurance fees, etc. than they would by offering the home owner a loan modification (i.e such as Making Home Affordable), approving a short sale or even foreclosing. Therefore, many homes will sit in limbo for many months even when the current owner is several months behind in their mortgage payments, but could pay a lower payment, or even if there is a buyer willing to buy the home. Apparently, the longer the loan is delinquent the more the mortgage servicer stands to profit. Of course, during this time the home is likely being neglected, which will ultimately result in the home being worth less when it ultimately sells. Since the mortgage servicer does not own the loan they are not losing any money and do not really care. According to the article, in June 2009 nearly 3,000,000 homeowners were 90+ days delinquent on their home loans (up from 1,800,000 in June 2008), but the number of homes taken back by the banks decreased to 245,000 (from 333,000 in June 2008). This goes hand in hand with what I wrote in earlier blog posts, More Evidence Banks Are Holding Back Foreclosures and Government Meddling and Banks' Incompetence Will Cause More Home Price Declines, where I stated that banks are not openly selling anywhere near number of true foreclosures. The number of seriously delinquent loans continues to grow. These loans should be modified or the properties should be sold via short sale or foreclosure. Instead, the mortgage servicers are just letting them fester. Of course, they will eventually have to be dealt with on way or the other. Most likely this will be via foreclosure after the owners just give up and move on.