Foreclosures Rise 48% in May as Repossessions Double (Update2)

Westbury, New York during a bus tour of foreclosed homes
on May 10, 2008. Photographer: Jin Lee/Bloomberg News

Highlights
Banks Repossessed: "Twice as many homes in May and foreclosure filings rose 48 percent from a year ago as falling house prices trapped borrowers in mortgages they couldn't afford,realty Trac Inc. said in a report today."

Michelle Meyer and Ethan Harris, economists at Lehman Brothers: "Foreclosures will account for 30 percent of national home sales this year as 1.2 million foreclosed single-family homes will eventually enter the market, they said. They estimate foreclosed properties, which typically sell for about 20 percent less than other homes, will depress home prices nationally by 6 percent."

Feedback Loop: ""The risk is that an adverse feedback loop will develop, in which problems in the housing market undercut the economy, causing even more stress in the housing and mortgage markets,'' Meyer and Harris wrote."

Wrong Way: "Lenders are afraid to lend and buyers are afraid they'll be under water in a year, so unless something dramatic happens we're going to continue to see the trend go in the wrong direction,'' said Rick Sharga, RealtyTrac's vice president of marketing."

Comments:

Foreclosure Status: Based on the facts reported there is no near term bottom in sight.

Titanic: We are all passengers on the same economic ship which just hit a real estate iceberg. It doesn't matter if you are in 1st class, 2nd class, or steerage the economic ship is taking on water and sinking. We must look beyond all the mistakes, poorly underwritten loan and misguided leadership and focus on a solution that will repair the rip in the hull of this once magnificent economy.


Jim