In Parts of U.S., Foreclosures Top Sales
NY Times
March 1, 2008

Mortgage foreclosure notices are going out so fast that in some states the number of new foreclosure proceedings each month is greater than the number of homes sold that month.

The foreclosure problem appears to be greatest in the West, particularly in Nevada, where home prices soared in the housing boom and are now falling rapidly.

Worries about foreclosures have led to a variety of legislative proposals in Washington and in state capitals, as well as to a voluntary plan organized by the Treasury secretary, Henry M. Paulson Jr., that seeks to delay foreclosures while homeowners and lenders try to work out agreements. But so far, no consensus has emerged on legislation, and the volume of foreclosure notices continues to rise.

During January, it was reported this week by RealtyTrac, there were 153,745 initial foreclosure notices sent out in the United States. That dwarfed the 43,000 total sales of newly built single-family homes and amounted to nearly half the total sales figure, which includes sales of existing homes and condominiums.

In the West, however, the picture was much worse. There the number of sales was barely higher than the number of foreclosure notices. It appears that in the most heavily affected states the sales totals lagged behind the number of foreclosure notices.

Moreover, the volume of foreclosures is especially high in some states. In California, RealtyTrac reports, nearly a quarter-million properties were subject to some legal action related to foreclosure in 2007. Not all those foreclosures were completed, of course, either because the process dragged into this year or because the homeowner managed to sell the house or come up with money to make the missed payments. But those foreclosure moves affected 1.9 percent of the living units in the state — or 1 in 52 homes.

California led the country in number of properties affected by foreclosure moves, but was only fourth in terms of the percentage of homes affected. Nevada led in that dubious category, with 3.4 percent — or 1 in 30 — of the housing units affected. It was followed by Michigan, which missed out on the housing boom but is playing a large role in the bust, and by Florida, which like Nevada experienced a wave of speculative building amid rapidly rising prices.

Those foreclosures, of course, represent dislocation for the homeowners being forced out of their homes and losses for the lenders. But they also represent an alternative supply of homes for buyers, providing competition for other sellers.

That can be particularly true because sales of homes that have been foreclosed, or are about to be foreclosed if they cannot be sold quickly, are made by sellers who are in no position to wait for better prices. Those sales can help to push prices lower for everyone.

For new-home builders, one result has been growing inventories of completed homes without buyers. The number of such houses across the country hit a record 197,000 in December, and slipped only to 195,000 in January, the Census Bureau reported this week. Moreover, the median age of such houses is up to 6.7 months, nearly twice the age of such houses when the housing market was peaking in the fall of 2006.

The states with the lowest rates of foreclosures tend to be states that missed the boom in housing prices and now have reasonably good economies. In South Dakota, there were only 50 homes involved in foreclosures last year, a minuscule 0.007 percent of homes in the state. Vermont, Maine, West Virginia and North Dakota also turned in rates below 0.1 percent.

Floyd Norris comments in his blog at

Original Text