Good News or a Breather

Wow - finally some good New Jersey news. The Record has an article about New Jersey bucking the foreclosure trend. (If only they could spell the title correctly.) While foreclosure rates are up overall, year-over-year there has been a slight decline. Rumors about that many lenders are either so swamped there is a processing lag or the banks are stalling foreclosures so as not to take the hit which would make them report their actual numbers. Let's take a look at the Record article -

Foreclosure activity in New Jersey declined 6 percent in March, compared with filings in the same period a year ago, RealtyTrac announced Monday.

One in every 775 properties in the state was in some stage of the foreclosure process — ranging from a default notice to bank repossession.

Nationwide, one in every 538 properties was involved in a foreclosure filing last month, according to RealtyTrac, which collects and sells foreclosure data.

Foreclosures have risen nationwide over the last several years, in part because many home buyers took out adjustable-rate and interest-only mortgages so they could afford houses as prices soared during the recent boom. Now many of those mortgages are resetting, raising monthly payments to levels that many homeowners cannot afford.

Although foreclosure filings have risen in New Jersey since the housing cycle turned down in 2006, the state's housing market is healthier than in many parts of the nation. Development is limited in New Jersey because of government restrictions and a lack of open space. As a result, the Garden State did not see the kind of speculative building that took place in Florida, Nevada, Arizona and California. In those states, foreclosure rates have risen faster.

Foreclosures are rising highest in the Super Bubble States the most. The whole country was in a bubble but the Super Bubble States of Florida, Nevada, Arizona, and California are facing crises that the rest of us can't begin to comprehend. Unfortunately it appears as if the government and lenders do not really understand what is happening either.

The Great Housing Bubble seems to be following Newton's law "For every action, there is an equal (in size) and opposite (in direction) reaction force." Not Realtors Law "It's a great time to buy a home!" The states that had the highest year-over-year increase are now facing huge year-over-year declines complete with foreclosure increases. Note that alot of the Super Bubble States had high numbers of people using liar and suicide loans as well as anything else that would land them a house. NJ has a good percentage but not nearly as high as many other states.

There is an interesting article and chart discussing foreclosure rates state by state in USA Today called rate of home foreclosures expecting to get worse. New Jersey is bucking the trend with the following other States - Alabama, Colorado (could this be right?), Iowa, Kentucky, Nebraska, North Dakota, South Dakota, Texas and West Virginia. Due to reporting changes it is not possible to tell which States have the actual highest foreclosure rates. Here is some interesting parts of the USA Today article -

One factor driving up foreclosures has been the number of adjustable-rate loans that have reset to higher rates, raising the amount that homeowners owe each month. Because ARM resets will peak later this spring, the pace of foreclosures could rise further into the third or fourth quarter of the year, says Rick Sharga of RealtyTrac.

... "We could argue this is the worst housing downturn ever," says Mark Zandi, chief economist at Moody's Economy.com. "Negative equity and unemployment are the driving factors. Things are getting worse, not better."

... "This isn't a subprime problem," says Dean Baker, co-director of the Center for Economic and Policy Research. "The underlying issue is housing prices are falling. It's going to get worse. Subprime (foreclosures) may have peaked and will start to trail off. In terms of the rest of the market, we're just beginning."

Some homeowners who might have planned to refinance into lower-rate loans are finding they can't because falling prices mean they owe more on their mortgages than their homes are worth.

... Zandi adds: "What we're seeing that's new is people who are under water" — whose loans exceed their home's value — "walking away" from those homes.

People are walking away already we still have huge wave of Option ARMs still to come. People are already underwater. Just wait for all the negative amortizations to materialize and even more people facing the foreclosure/walkaway dilemma.

Some of the best advice floating around on this topic is from Mish's Global - read it and remember.

If you are in agony over a pending decision to walk away, just remember, your moral obligation is not to Paulson or your lender, nor is there any patriotic duty to bankrupt yourself for benefit of others. Please don't blow your life savings, tap your IRA, or use credit card debt to forestall the inevitable. Your moral obligation is to yourself and your family. If it makes economic sense to walk, then walk.

Some common sense. Thanks Mish!

On a side note - a big topic on various boards is the actual definition of "walking away". Some people apply it to anyone who leaves their property. Others use it only in the cases where people who can pay a mortgage choose not to do so because they are underwater. Hopefully the term is streamlined soon so we are all discussing the same thing. Because classifying someone who leaves during the foreclosure process is not the same as someone who is leaving a property since their investment is worth less than when they purchased it. Many, many people have mortgages they will never be able to afford so these people are not walking away - if they leave the property they are really just waking up or getting off the kool-aid.