Foreclosures Up 71% in Q3

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This probably won’t come as a surprise to the many Realtors and investors reading this e-mail, but RealtyTrac announced today that US foreclosure filings were up 71% in the third quarter over the same period last year.  Almost 766,000 homeowners had a sheriff show up at the door and with a foreclosure complaint in hand.   Six states made up for nearly 60% of the list: Arizona, California, Florida, Michigan, Ohio, and Nevada.   If you think for a moment that short sales and REOs are just a 2008 event you’re crazy.  This will continue well into 2010 as the market absorbs the inventory that is just now coming online…

Alan Greenspan, famous for his “irrational exuberance” comments that took the air out of the Internet bubble, now has a new moniker he’ll be known for: “Credit Tsunami.”  Greenspan testified before Congress this morning and told lawmakers that he was in a state of “shocked disbelief” over the extent of the credit crisis and the credit tsunami that has ensued. 

The former Fed Chairman said that the key to relief will be stabilizing home prices, which he doesn’t foresee happening for “many months in the future.”  “Given the financial damage to date, I cannot see how we can avoid a significant rise in layoffs and unemployment,” Greenspan said. “Fearful American households are attempting to adjust, as best they can, to a rapid contraction in credit availability, threats to retirement funds and increased job insecurity.” 

In banking news, the venerable Goldman Sachs plans to announce today that it will lay off 3,260 employees, reducing its workforce of 32,500 by 10%.  

Now, on to our real estate education section …

Back to the Future

Ahhh, the good old days. It may be hard to believe but there was a time when the average selling price of a home in this nation was under $30,000…in fact, it cost $28,900 to purchase a middle class home in 1973…a mere 35 years ago. Of course, gasoline cost 38 cents a gallon, a first class postage stamp was 8 cents and a dozen eggs were 45 cents.  Yes, wages were also lower with the median family earning just over $12,000 a year…but it took $8,000 a year to qualify for the mortgage leaving the average family an extra $4,000 a year to save or spend as they see fit…nearly 1 out of every 3 dollars earned.

Today all of that has changed. The average cost of a home is over $200,000, gasoline is $3 to $4 a gallon, stamps seem to go up by the week and a dozen eggs are $3 to $4 a dozen. Although wages are higher, the median household income of $52,000 leaves less than $7,000 needed to qualify for the mortgage even with lower interest rates.

Ask yourself one simple question…how many houses would you have bought for $28k in California, Florida or other areas of the country in 1973 if you had the opportunity? Remember, this was the median selling price –many homes could be bought for much less! Let’s take a quick walk down memory lane to see the price of homes throughout the years: