Bad Credit Home Buying Loans with Realty Foreclosures Factor in High Unemployment Foreclosed Houses

Bad credit home buying has been crippled by pre foreclosure listings in the U.S. American homeowners fight to prevent foreclose as realty foreclosures factor high unemployment. Economic reports highlight the debilitating state of U.S. home buying. U.S. home loan demand has fallen to a thirteen year low in early July. The Mortgage Bankers Association also said that refinancing demand is also falling. This is in the environment of massive bailouts of American banks, homebuyer schemes and near record-low mortgage rates.

Consumer confidence has been rocked in the U.S. by dissatisfaction with the Obama administration, the BP oil spill, high unemployment and home foreclosures. These are not factors that attract potential homebuyers. Homebuyers, like stock buyers are increasingly waiting on the sidelines for house and stock prices to fall. Realty foreclosures also factor high unemployment. The U.S. employment report for June disappointed analysts and threats like the drilling moratorium overhang the US economy.

The U.S. Mortgage Bankers Association reported that requests for new loans to buy homes fell 3.1 percent in the week ended July 9. This was taken into account the Independence Day holiday. This was the lowest level of home loans request since December 1996. Significantly this is despite record low mortgage rates and in a market of falling home prices. Average 30-year mortgage rates are near the record low of 4.61 percent that was seen in March 2009. (MBA records date back to 1990). The 30-year rate was at 4.69 percent for the reporting week.

The demand for new loans was not the only sign of weak loan demand. Home refinancing applications also fell 2.9 percent. The mortgage market index fell 2.9 percent also. The mortgage index is a tool used to measure total loan demand. Those with perfect credit records are attracted to buy or refinance their homes. However they appear to holding off for lower home prices and lower interest rates. The June CPI showed a fall of .1, which has investors concerned, that America is heading into a deflationary spiral. In this instant asset values tend to fall all stay flat. What is interesting is that the beginnings of hyperinflation and deflation appear similar so we have two possible scenarios here.

We have a defunct economy riddled with government interference on one hand and a Federal Reserve printing press on the other. What the economy needs reflation at a sustainable level. In an economy that is fraught with political ignorance and financial fraud and short term thinking this is a tough ask at present. A whole corporate and political psyche needs to change. This involves the people changing form a policy of bi-partisan sheep following to actually demanding progress, honesty and sound stewardship of their own. Again this requires a mass psyche change, can America do it?

American Cities With the Highest Foreclosure Rates.

A report out by Lender Processing Services (LPS) who are mortgage industry provider from Florida compiled a report on the worst American cities for foreclosure. There is a pattern they are the cities that experienced the highest bubble property activity and price gains. This is a common pattern when any speculative bubble bursts. Many people have the misconception that owning property is not speculation.

Las Vegas, appropriate as America’s gambling Mecca ranks as the worst city for foreclosures. 

The states of Florida and California also feature highly, both very prone to bubble activity. This is a national problem, the report shows of the ten most foreclosure prone American cities 7% of all loans are now at least 90 days delinquent. The average is a 4.4% average delinquency over America’s hundred largest cities. 

Keep in mind that Federal government has instituted policies that have seen modified loans to avert foreclosure. While some foreclosures will be averted through the Making Home Affordable program or direct negotiations with their lenders the outlook is grim. Despite this delinquency rate remain. If you couldn’t pay the loan off before because you didn’t have either the income or inclination then a huge majority still won’t make the lower repayments.

When we look further into the bad credit home buying fall off there are a number of reasons including high unemployment and foreclosures. Another is the expiration of homebuyer tax credits on April 30. It is clear that there was a rush by buyers to get in and be eligible for the tax incentives set buy the Obama administration. More pointedly the demand for loans to buy homes has fallen in all but one of the ten weeks since the home tax credit expired. 

The MBA noted that refinancing loans were again 78.7 percent of all mortgage applications last week. Another aspect of refinancing is that homeowners do not want to purchase a new home when they still expect lower prices. Perhaps this becomes a self-fulfilling policy and prices do fall or it is a pattern of wishful thinking. If the economy does take another leg down than continuing house price falls are likely.

Kyle Lundstedt who is senior managing director at LPS describes the situation as  "a cascading waterfall". He explains "Just because there's not as much water in the pool at the bottom doesn't mean there's not a lot of water in the buckets at the top."

LPS says around half of restructured delinquent loans still finish up in foreclosure within a year. 

The bubble has meant that many homeowners are underwater as home prices topple. If you think in the bubble states they are likely to return to their peak take a look at the NSADAQ stock market it is nowhere near its peak of 2000. The report note that in the big three foreclosure capitals of Las Vegas, Orlando and Miami there are 68,670 homeowners delinquent by more than 90 days on their mortgages. 

California’s debt crisis is more critical than that of the PIIGS. That is California’s debt is larger than Portugal, Greece, Spain and Italy combined! California has six out of the ten worse foreclosure cities in America. 

It is not just the highflying bubble cities that have affected. The property bubble was American wide and the demise of the US economy is nation wide. A good example of this is the foreclosure rates in Memphis, Tennessee. Memphis was subject to the Wild West house flipping of California, Arizona and Florida yet 7.1% of all home loans are now 90 days overdue.  This is an example of what no jobs can do. Memphis has a 10.2% unemployment rate. This is the situation that overhangs the Gulf States right now because of the BP oil Spill. 

Lundstedt of LPG points out "When you combine even moderate house price declines with significant unemployment, you get a double whammy that has significant consequences for the consumer." This is why centers like Detroit that has suffered chronic unemployment and devastated property prices have not recovered for years. You got to be able to pay the rent, or the mortgage.

Americas foreclosure epicenters, the metropolitan areas that have the worse risk of foreclosure are listed below.

1. Las Vegas, Nevada

• Number of loans 90 or more days delinquent: 33,985
• Percent of loans 90 or more days delinquent: 9.86%

• Number of homes in foreclosure: 29,991 

• Percent of homes in foreclosure: 8.70%

2. Riverside-San Bernardino-Ontario, California

• Number of loans 90 or more days delinquent: 62,158 

• Percent of loans 90 or more days delinquent: 9.71%

• Number of homes in foreclosure: 30,816 

• Percent of homes in foreclosure: 4.81%

3. Stockton, California

• Number of loans 90 or more days delinquent: 8,853 

• Percent of loans 90 or more days delinquent: 9.40%

• Number of homes in foreclosure: 4,459 

• Percent of homes in foreclosure: 4.73%

4. Modesto, California

• Number of loans 90 or more days delinquent: 6,529 

• Percent of loans 90 or more days delinquent: 8.83%

• Number of homes in foreclosure: 3,224 

• Percent of homes in foreclosure: 4.36%

5. Bakersfield, California

• Number of loans 90 or more days delinquent: 9,011
• Percent of loans 90 or more days delinquent: 8.55%
• Number of homes in foreclosure: 3,987 

• Percent of homes in foreclosure: 3.78%

6. Vallejo-Fairfield, California

• Number of loans 90 or more days delinquent: 5,007
• Percent of loans 90 or more days delinquent: 7.60%
• Number of homes in foreclosure: 2,430
• Percent of homes in foreclosure: 3.69%

7. Orlando-Kissimmee, Florida

• Number of loans 90 or more days delinquent: 23,235
• Percent of loans 90 or more days delinquent: 7.18%
• Number of homes in foreclosure: 36,349
• Percent of homes in foreclosure: 11.24%

8. Memphis, Tennessee

• Number of loans 90 or more days delinquent: 11,450
• Percent of loans 90 or more days delinquent: 7.11%
• Number of homes in foreclosure: 3,138
• Percent of homes in foreclosure: 1.95%

9. Miami-Fort Lauderdale-Miami Beach, Florida

• Number of loans 90 or more days delinquent: 57,780
• Percent of loans 90 or more days delinquent: 7.05%
• Number of homes in foreclosure: 125,225
• Percent of homes in foreclosure: 15.28%

10. Fresno. California

• Number of loans 90 or more days delinquent: 7,908
• Percent of loans 90 or more days delinquent: 7.02%
• Number of homes in foreclosure: 3,287
• Percent of homes in foreclosure: 2.92%

Source: Lender Processing Services (LPS)

Last week we had the Standard & Poor's Case-Shiller indexes indicating an average decline of thirty percent across America in home prices. It is estimated that we will see further declines. One can look at the drop off in auto sales after the cash for clunkers expiration for hints to future activity. 

Home Builders Sentiment Index Bleak

The National Association of Home Builders - Wells Fargo Housing Market index U.S. for July was a dismal showing. This index is watched because it measures homebuilder sentiment.  The index fell two points to 14, which is the lowest since April 2009.  Economists had expected the index to fall to 16. Ominously the June number was revised lower to 16 from the reported 17.

The index is designed to show Home Builder sentiment. A reading below 50 is an indication that more builders view sales conditions poorly rather than good. The Homebuilders index has not been above 50 since April 2006. This gives an indication of the depth of the property slump and the amount of house inventory on the market.

Housing Market Index three sub- indexes.

• The current sales conditions fell two points to 15. This is the lowest level since March 2010
• The sales expectations index for the next six months fell one point to 21. This is the lowest level since March 2009.
• The traffic of prospective buyers index rose three points to 10. This is the lowest level since March 2010.

NAHB chief economist David Crowe pointed to the end of the homebuyer tax credits and the weak American economy. 'The pause in sales following expiration of the home buyer tax credits is turning out to be longer than anticipated due to the sluggish pace of improvement in the rest of the economy.'

Crowe added that the housing market faced 'hesitant home buyers, tight consumer credit, and continuing competition from foreclosed and distressed properties that are priced below the cost of construction.'

When you see house prices falling and homebuilder’s sentiment so depressed there is little wonder bad credit home buying is so anemic. When you add into the equation the realty foreclosures factor and high unemployment overhang it gets decidedly grey. One suspects that housing will drag on the American economy for at least into the third quarter.