Some really bad news for the economy. Foreclosures are rapidly increasing in areas previously only lightly impacted by the crisis in real estate:
Many cities with populations larger than one million experienced rapid increases in foreclosure during the past six months. Seattle, for example, wasn’t the worst hit city, but it experienced the biggest increase in the rate of filings. While a relatively small 1 in 107 homes received notices, that is a 72% jump compared with the same period a year ago. In second place was Minneapolis, where the filing rate grew by 58.6% to 1 in 90 homes; Phoenix spiked 51.7% to 1 in 22.
The CNN story only briefly touches on what is driving this unpleasant phenomenon. This time it is not sub-prime mortgages. This time it is the loss of a job or the cutting of wages:
“As unemployment rises, we are seeing a change in the financial profile of the people seeking our help,” Suzanne Boas, president of Consumer Credit Counseling Service of Greater Atlanta, said this week.
“We are serving an increasing number of people who work in professional services and skilled trades,” she said. “These people have maintained solid incomes their entire lives, but are now in financial trouble and are reaching out for counseling to help avoid foreclosure.”
In June, 72 percent of homeowners who got foreclosure prevention counseling from the agency, which serves all 50 states, were either unemployed or reported a drop in income.
RealtyTrac this month reported a record 1.9 million foreclosure filings on more than 1.5 million properties in the first six months of this year. The pace picked up after various temporary freezes ended in March.
The company forecasts 4 million filings for the year.
There is an ugly domino effect of this for those who are not currently in financial trouble as well. Fire sales of distressed properties push prices lower for all other real estate, depriving families of equity and wealth. Worst of all, there is a wave of foreclosures predicted when adjustable rate mortgages reset in the next few months. It is getting very scary out there. Those numbers out of Atlanta should give you pause. People who have never been in financial trouble before are suddenly in very deep water.
The Obama administration brags up the fact that the Obama “stimulus” plan “stopped the freefall” in the economy. It looks like the “stimulus” merely shifted where the economy was faltering from one place to another.