Foreclosures Rise 14% in December

Posted Jan 14th 2010 9:00AM by Tom Johansmeyer
Filed under: Indices, Economic Data, Housing, Recession

Foreclosure filings spiked in December. The 14% increase from the previous month made the first monthly increase since July -- and a hell of a severe way to break the streak. The double-digit increase, reported by RealtyTrac, brought the number of foreclosures to 349,519 in December. In addition to the increase from November, the result is a year-over-year increase of 15% from December 2008. In 2009, 2.8 million foreclosures were filed, up 21% from 2008 and 120% from 2007.

Foreclosure activity reached a monthly high of 361,000 in July, but loan modifications, state legislation extending the foreclosure process and the volume of homes in the foreclosure pipeline had resulted in a gradual decline from that point. From the third quarter to the fourth, foreclosures fell 7%, though the rate was still up 18% from the fourth quarter of 2008. California posted a 17% decline in foreclosures quarter-over-quarter, though it increased 9% from November to December.

This year, close to 2.4 million homes are forecasted to be consumed by the foreclosure process, auction or other forms of disposition, reports Moody's in Economy.com. More than 700,000 homeowners received some trial modifications as of early December, according to the Treasury Department, but that might not be enough. Mark Zandi of Economy.com, told USA Today, The foreclosure crisis continues on. I don't see any stabilization." He noted that the "foreclosure crisis is in full swing" and that the mortgage "modification efforts aren't working that well." The situation should lead to lower home prices through the spring and summer, he said.

An increase in short sales, in which banks allow homeowners to sell for less than their mortgage balances, may help the housing market, by increasing liquidity and at least easing the pressure of delinquent mortgages. And, according to Zandi, it costs the bank less than foreclosure.

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