If TX housing is so strong, why are we leading the nation in foreclosures?

[houstonmacbro]

I keep hearing mixed reports about the state of the housing market (and the economy in general) ... some are saying we are going strong. Some are saying they we are entering a recession and housing is going to be the main reason.

I have heard people on this board say housing in TX is strong but if that is the case (strong economy, job market, etc.) then shady interest rates and creative financing cannot be the SOLE reason for why Texas is leading the nation in sheer volume of foreclosures?

Can it?

***

Foreclosure rates up big in December

Lower lending standards and softening markets contribute to continued troubles for homeowners.

By Les Christie, CNNMoney.com staff writer

January 17 2007: 6:40 AM EST

NEW YORK (CNNMoney.com) -- Americans continue having difficulties paying their mortgage obligations, with December foreclosure rates above the 100,000 mark for the fifth straight month.

The number of homeowners entering into some stage of the foreclosure process in December was 109,652, down 9 percent from November but up 35 percent from December 2005, according to RealtyTrac.

Adjustable rate mortgages, especially sub-prime ARMs, continue to drive the spike in foreclosures: Many of those loans are due to reset in 2007 and many of the loans written in 2006 are performing less well than previous years.

Full article here

[musicman]

tx is a large state and in sheer numbers we have more homes than most states.

prices have gone up ...El Paso 14.3, Beaumont 12.9, Amarillo 8.7, San Antonio 6.4, Houston 5.3, Austin 5.0, Dallas 2.8, Corpus 1.4 according to the article so the market is still good.

The country as a whole the prices have gone down 1.2% with the south being the most stable area with a total loss of 0.1 %.

I think the majority of foreclosures are people who have been living beyond their means and who were only able to purchase a home with an adjustable rate mortgage which isn't stable longterm.

[houstonmacbro]

Great, clear, analysis.

Thanks!

[Spike101]

Houston real state has not followed the same trends as the rest of the country. Certain areas of Houston have even increased by 12% (Sugar Land area). Job creation is a good indicator of the upcoming real estate trends with an estimated 90,000 jobs to be created in 2007. Makes me happy!

We have not seen the the peak of foreclosures. When interest rates really dropped, lenders lessened their requirements in order to capture as much business as possible, including new sales and refinances. Many borrowers who would not qualify under regular conditions were able to get into homes. This is where the bulk of the forclosures are coming from. Now, lenders are tightening up their approval conditions and you will see less of the "creative" loans available. This should keep the balance in check.

There is another reason. The concept of real estate investors has always been a controversial one. Usually, they prefer markets with a higher rate of return, like Pheonix used to be. As those markets are not so hot right now, more of their monies are arriving in Houston. There is a correlation with higher number of investors and foreclosures. Not sure why.

[TJones]

I see most of the foreclosures going on people who have been suckered into getting a 2 or 3 year ARM as a mortgage. Great rates for people with crappy credit. Then when the time to "adjust" the rate on your mortgage comes, these same people have failed to improve their credit in the last 2 or 3 years, and the interest rate increase has become sooooooo large, that they now cannot afford the monthly mortgage. The mortgage now becomes too much for them to handle and then they cannot sell in time to get out of the house, and they get foreclosed on by the bank. Keep in mind that the banks who are doing these types of loans for people are very very agressive, and they will foreclose at the drop of a hat as opposed to trying to work it out with the foreclosee.

[TAK]

There is a correlation with higher number of investors and foreclosures. Not sure why.

Foreclosures are often an opportunity to buy below retail, which is what investors are looking for. My first real estate investment was a foreclosure. I bought it 25% below the hcad appraisal (which, in this case is probably not 85% of market, but still below market.) Interestingly, an investor owned it and got foreclosed on (for some odd reason, he just walked away. he was renting it for $200 ABOVE market and walked away from easy cash and let the place go.)

You may be referring to a number of speculators (also investors) and foreclosures, which there are also quite a few of who got caught in the expectation of high appreciation on new homes, to find that this is houston, where there is plenty of land and another new block of houses not long away.

[VicMan]

Also, there are a lot of houses with tax liens in gentrifying areas, right? This means that many houses will be taken by the city and the banks as land values increase and demand for condos and increased space in the local universities increase, right?

[musicman]

Also, there are a lot of houses with tax liens in gentrifying areas, right? This means that many houses will be taken by the city and the banks as land values increase and demand for condos and increased space in the local universities increase, right?

There are many houses all over town with liens/back taxes due and they will eventually put on the auction block.