New Jersey Mortgage Problems Grow: State Cracks Top Ten in Foreclosures
Take the popularity of adjustable-rate mortgages, add in a slowing housing market, mix with a strong dose of high energy costs and, in some parts of the U.S., a high unemployment rate… and what do you get?
The perfect recipe for a foreclosure surge.
Several firms that track foreclosure activity have released data in recent days that show more and more homeowners are missing mortgage payments, are in danger of losing their homes or are in the process of losing them altogether, the Trenton Times reported Sunday.
It may be getting tougher for many New Jersey home owners to meet mortgage payments, but the real estate market has yet to be overwhelmed by foreclosures.
“There’s no question the rates are going up … (but) I think people are looking for the sky to fall, and it’s not,” said Mark Vitner, a senior economist for Wachovia Bank.
RealtyTrac, a firm that collects foreclosure stats, says more than a million homes across the U.S. - one out of every 1,001 - have entered foreclosure so far this year, up 27 percent from last year. And the 115,568 properties under threat of or in foreclosure in October was the highest month so far this year, representing a 42 percent increase over October 2005.
Against this backdrop, New Jersey cracked the top 10 in states for the first time in October. Last month, 4,904 New Jersey homes — or one out of every 675 — was in the foreclosure process.
Overall, New Jersey may be faring better than other states, however. Florida and Colorado mortgage loans are becoming a bigger problem for the cash-strapped residents of those states with resetting ARMs. Things could be worse, however. Nationally, the number of homes in the foreclosure process is up just 5.3 percent for the first 10 months of the year.
The actual rate of foreclosure remains relatively low — about 0.3 percent in New Jersey, according to the most recent data from the Mortgage Bankers Association. In comparison, the foreclosure rate in the early 1990s, hit by the housing market crash in the late 1980s, was around 5 percent.
“We’ve had a number of variables in the market. Prices aren’t appreciating as much as they were before. That’s hit speculators hard, and mortgage rates are also higher. The economy is slowing,” Vitner said.
Analysts say a big reason for the huge increase in foreclosures is the popularity of adjustable-rate mortgages and other exotic loans, which offered low rates for the first few years, but have adjusted up as interest rates rose. Those types of home mortgage loans lured many people into the market who, without a lending gimmick, would not have been able to afford their homes.
But while many expect the rate of delinquency to climb, we are not seeing a crash-and-burn scenario. Foreclosures represent a small part of New Jersey’s market — 1,200 houses out of 65,000 for sale. The jump is happening at a time when the market has seemingly hit bottom and is poised to bounce back.
Other areas can’t say the same thing. After years of booming sales and real estate values, Nevada mortgage holders are defaulting like never before, as the Silver State has come in second for five straight months in foreclosure filings. A large number of investors driving up prices and then bailing on properties has skewed the markets in states such as Nevada.