Simply put, increases in foreclosures is due to high unemployment levels. This really is not a surprise. If people do not have money to pay their bills, then bills do not get paid, and foreclosures happen.
According to USA Today, high unemployment drove up foreclosures in 72% of 206 leading metropolitan areas last year, including many not hit as hard by the initial foreclosure waves that pounded cities in Nevada, California and Florida, market researcher RealtyTrac reports today.
“The recession has been brutal. The side effect of that is typically more foreclosures,” says Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University.
“Foreclosures became more widespread in 2010 as high unemployment drove activity up,” says James Saccacio, RealtyTrac CEO.
Despite some dips in hard-hit areas, foreclosure levels remained five to 10 times higher than historic norms in most of those markets, Saccacio said. Activity will roar back in those regions, says Mark Zandi, chief economist of Moody’s Analytics.
“Last fall, major mortgage servicers, including Bank of America, delayed foreclosure activity as they revamped paperwork following revelations that foreclosure documents may have been improperly prepared. Zandi says the foreclosure delays were more pronounced in the biggest housing-bust markets.”
He expects foreclosure activity to pick up substantially in those areas in the next few months as the foreclosure process issues are resolved. Almost 2.9 million U.S. homes received foreclosure filings last year, a record high. http://www.usatoday.com/money/economy/housing/2011-01-27-foreclosures27_ST_N.htm
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Since high unemployment is the main culprit behind foreclosures, expensive gimmicks, like home loan modifications, are not going to fix the housing market. Until more jobs become available, the economy will continue to be stagnant and the foreclosures will continue to be high.