Foreclosure rates are on the rise in the United States, with some states with recent housing growth seeing the largest rise in foreclosures. These rates are expected to rise until governments, lenders and homeowners can settle on an agreeable process for home lending.
Foreclosure Rates are on the Rise
RealtyTrac, the leading reporter of foreclosure properties, maintains a quarterly Foreclosure Market Report which tracks the filings for foreclosures throughout the United States. The report includes bank repossessions, auction sale notices and default notices.
According to RealtyTrac's first quarter 2008 report, almost 650,000 properties were foreclosed in the first quarter of 2008 - one in every 194 households in the United States. This is a 23% increase from the last quarter in 2007 and a 112% increase from the first quarter in 2007.
Foreclosures Are Nationwide
Nationwide about one percent of households were in foreclosure by the end of 2007, which is a 75% increase over 2006. By the end of first quarter of 2008, one in every 194 households in the United States had received a foreclosure notice.
The increase in foreclosures was felt in 46 out of the 50 states and in 90 percent of the nation's 100 largest metro areas. This nationwide increase was largely due to a nationwide economic slowdown including job loss and rising consumer prices.
States with Major Foreclosure Rates
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According to the RealtyTrac report, all states have been experiencing a growth in foreclosures, but the greatest gains tend to be in areas which have recently experience a housing boom. Most at risk are the homes that were purchased with higher risk loans, designed to start with a lower interest rate and monthly payment, both of which escalate over time. As the loan rates escalate more and more people are unable to meet the monthly payment and the house eventually goes into foreclosure.
Nevada, Florida, Michigan, California and Colorado had the highest rates of foreclosure in 2007 ranging from 1.92 to 3.38 percent of the states' households. States with major housing growth such as Nevada and California had foreclosure counts that were over 200 percent more than the prior year; this is triple the rate of foreclosure in the prior year.
What State Has the Highest Foreclosure Rates
In 2007, Nevada beat out all fifty states for the number one position in home foreclosure rates with 3.4 percent of its households entering some stage of foreclosure during the year. This is more than three times the national average.Nevada has experienced a large growth in the number of new homes built during recent years. Unfortunately, the rate of foreclosures has grown along with the number of new houses. The number of homes entering foreclosure in 2007 were an increase of more than 200 percent over 2006.
Foreclosure Rate Trends
As current mortgage loans "reset" to new interest rates, the corresponding increase in monthly payments is projected by RealtyTrac to result in more foreclosure until homeowners either refinance their mortgage loans or somehow obtain financial help in paying their ever-increasing mortgage payments.
This financial help could come in one or many forms such as:
- Changes made by lenders to reissue existing risky loans
- Decrease in the number of high risk loans granted by lenders
- Federal control over the amount of interest charged
- Federal and state incentives to mortgage companies to offer lower risk loans
- Increased Federal exclusions for mortgage-paying taxpayers
- Increased Federal assistance for taxpayers to avoid foreclosure
What to do Now
Congress and many state governments are looking at a variety of ways to minimize the rate of housing foreclosures. Resolution of the foreclosure problem is not projected to be achieved quickly. Homeowners should concentrate on:
- Making sure they can afford the house they are purchasing
- Minimizing wrongful foreclosure by getting foreclosure help on their property before the foreclosure process begins
- Staying in communication with their lender if they start to have problems which might cause them to fall behind in payments on their house