Last month, there was finally some good news about the housing market. The number of foreclosures in April had declined by 9% from the previous month. And analysts even began to argue that beleaguered states like California may have made it the other side of the foreclosure crisis at last.
Yet, as tempting as it is to breathe a sigh of relief, it may be too soon to break out the champagne and celebrate. April’s housing numbers were still dismal, as more than 320,000 homes went into foreclosure that month. The truth is that foreclosure rates remain high across the country and according to some economist, they will remain high for years to come.
ABC News reports that there are currently between 2 million and 8 million homes in the U.S. that either have been repossessed by lenders and kept off the market, or have owners that are delinquent on payments and at risk of foreclosure. That number may sound high, but it’s actually a low estimate by some standards. According to RealtyTrac, there are “forecasts that 10 million homeowners will be foreclosed through 2012 as more mortgage holders are unable to refinance their mortgages because of falling home values or give up at the prospect of holding on to their homes all together.”
The millions of possible foreclosures ahead could have serious impacts on the housing market and the economy as a whole. As ABC notes, this would force down the price of real estate in neighborhoods with foreclosed properties, hurting many homeowners. On top of that, RealtyTrak estimates that every foreclosed home costs the economy $225,000 in lost mortgage money.
To make matters worse, the government’s mortgage relief plan, which aims to help those with mortgages that are worth more than the value of the house, seems to mostly be a failure so far. But there is some hope.
Several states are now taking up the battle to help fix the foreclosure crisis. A new law took effect in New York earlier this year that requires banks to maintain foreclosed properties so that they don’t drag down the values of other properties in the affected neighborhood. Massachusetts passed a bill in April that protects renters from being evicted from foreclosed buildings. And California is currently considering legislation that would require banks to be more upfront about their loan modification status before foreclosing on a property.
This may not quell the tide of foreclosures to come, but if more states pass similar laws, it could at least prepare the country to absorb the inevitable blow.
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