A Closer Look at Foreclosures in the United States

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A Closer Look at Foreclosures in the United States

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Despite the decline in the foreclosure filings due to slowed lender processes, the country is still experiencing an incredibly high foreclosure inventory in comparison to one year ago. Specifically, we are looking at a 12.7% increase in foreclosure inventory over the last year asreported by the Lender Processing Services. Clearly, we as a nation have a long way to go to help the real estate market and the economy of the entire country to rebound and progress. 

However, there has been a drop of 16.3% in delinquent mortgages in the last year even with the 2.4% increase reported in April. This does indicate a positive sign and probably has something to do with the slowly decreasing unemployment rate. Even with the double-digit decline, over 4.2 million people are at least 30 days behind on their mortgage payments, indicating that suffering is still occurring as many Americans struggle to pay their bills amidst rising gas prices and high unemployment.

What does all of this mean to real estate investors and prospective homeowners? 

Well, increases in inventory have a negative effect on prices, since high supply and steady demand will result in lower prices – basic economics 101. This is great for investors who want to grab discounted properties and sell them later for a profit, and is also great for homebuyers who want to grab a foreclosure to get a discount. It is bad, though, for those who live in areas with extensive inventories, since it will lower the value of their own home – which could make them underwater on their mortgage.

The drop in delinquent mortgages is a good sign, and means that people are becoming more able to pay off their mortgages on time. Keep in mind, though, that this 16.3% decrease in the last year is because of the extraordinarily-high amount of delinquent mortgages from 2006-2010, so any decrease – even a large one – is still not enough to restore the market to pre-2006 levels.