Foreclosure Numbers Galloping Ahead Without Rest

April 14th, 2008

The number of foreclosures in Charleston increased by leaps and bound from January to end of March 2008. It was a ditto of the drama being played on a national scale making everybody worried about the national economy.

In the tri-county area (Dorchester, Charleston and Berkeley) lenders sent foreclosure notices to owners of 874 residential units during the first quarter of this year. In Charleston and Berkeley the jump was from 638 to 425 foreclosures – a jump of 50.1%. In Dorchester County the court auctions rose by 53.8% as compared to the same time in the previous year.

The fate of foreclosures and real estate market are entwined together. As foreclosure number raises so too does the numbers of houses waiting to be sold. People unable to sell their houses slip into foreclosures as they cannot modify their mortgages. It is a close-ended vicious circle. The net result is that value of property is falling at a rapid rate.

Frank Hefner, economics professor of Charleston College comments that for this situation people are largely to blame for buying houses they could not afford. The government too has to share the blame by willy-nilly encouraging house ownership. From the 1990 the scales tipped in favour of the buyers in the debate centred around buyers versus renters. From then on housing prices began to rise and lenders jumped in to create novel ways to make people swallow easy mortgages.

In Charleston as in other places it became profitable to own a house that could be sold off at a higher rate in the not too distant future. But with the bursting of the housing balloon many house owners are finding that the loan is more than the value of the house. This has made refinancing difficult. When loans had been granted the lenders did not verify income statements and moreover the value of the house was falsely increased to facilitate sanctioning of larger loan amounts and consequently fat commissions. Hefner clarified that one who has taken a ARM floating mortgage means that speculation is one of the motives implying quick profits. But those who opted for long periods like 30 years for a mortgage meant they were interested in setting up a home in the house.

In Charleston the number of houses up for sale has gone up to 11,000. It is a buyer’s market but cloudy weather for the sellers.

Via

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