Home Foreclosures On The Rise

(CBS)  Weld County, Colorado, was one of the hottest housing markets in the country...until two years ago.

"At the very best, we're flat," real estate agent Matthew Revitte tells CBS News correspondent Sharon Alfonsi. "And we could be perhaps contracting."

Revitte sold many homes before oversupply and rising interest rates torpedoed the market.

"We've yet to hit bottom," he tells CBS News.

Homebuyers with adjustable rate mortgages faced payments they couldn't afford. Those forced to sell couldn't find buyers and hundreds defaulted on their loans. Now the place leads the nation in foreclosures – 1 in every 168 households. That's 700 percent higher than the national average.

"Almost overnight it's like somebody turned the lights off," Revitte tells Alfonsi. "Now we are going through the great correction."

According to a new report, they're not alone. Nationwide, more than 300,000 properties entered foreclosure during the 3rd quarter — up 43 percent from a year ago.

"Somewhere between 1.2 and 1.3 million properties will end up in some state of foreclosure over the course of 2006," says Rick Sharga of RealtyTrac, a properties listing company.

Things are so bad in Colorado that the state just set up a first-of-its-kind foreclosure help hotline. It got 1,400 calls on the first day.

"There's north of a trillion dollars in adjustable rate mortgages that are going to reset over the next 15 months," says Sharga. "And what that means for the average homeowner is an increase of between 20 and 50 percent of their monthly mortgage bill."

That's expected to sink thousands of homeowners who bought into the boom with no down payment and risky financing like interest-only loans.

Margaret Hernandez lived in Weld County for five years. Recently, she returned for the first time since she foreclosed in April.

"I can hear my kids," she recalls as she breaks down crying. "I can hear my kids talking and just hearing them playing and talking and eating and everything else...it's hard."

While the emotional toll of foreclosure is personal, the financial impact is shared. You can expect your home value to drop $10,000 or more if a neighbor defaults.

"I don't think the circumstances here in Weld County are that unique to what perhaps could happen in the rest of the country," says Revitte.

Experts CBS News spoke to agree: predicting foreclosures will climb through – at least – the end of next year, forcing many more people like Margaret Hernandez to start over again.

"I really tried hard to keep it and I think will take an eternity to own again but I'm gonna work hard at it – the Lord has to bless me some how again," says Hernandez.

Colorado, Nevada and Florida now have the highest foreclosure rates, while the number of foreclosures in California have tripled since the last year.

[chirthi]

The real issues here lie on the plates of our politicians and leadership who have NOT acted to curtail rampant speculation in the housing markets. It is realestate speculation that has pushed home values so hard.

What comes next is something anyone with a basic education could or should have seen coming: The inevitable result of endlessly rising home prices has to be a housing crash. It's simple logic: When home prices advance at 15% - 20% a year (far faster than family income) it doesn't take very long for the cost of housing to radically outstrip consumer's ability to pay. Housing prices have reached a threshold where home values are so absurd that demand has stalled or is in retreat. The kind of correction in the housing industry that will need to happen to restore balance will have to mean radical reductions in home prices, radical restructuring in the home building industry, or radical alterations to the kinds of dwellings being built... probably all three. Regardless, it spells out trouble for our economy and trouble for the average American.

[chirthi]

People here are attributing our housing meltdown to predatory lending, to individual stupidity, to shoddy building standards, etc... but the real cause is simply this: excessive valuation. In markets across the country home values are so grotesquely high that buying a home has effectively become impossible for most families. I live in Orange County, California, where the average selling price of a new single family home has reached the range of $700 - $800 thousand dollars. With a 30 year fixed note, a 6.5 interest rate, and property taxes of 1.9%, the monthly payment for this home runs well over $6000. The obvious result is that it is quite impossible for the average household to afford. Bluntly, the housing market is imploding because home prices have risen so dramatically over the past 5 years that there are too few buyers. The statistics bear this out: As of LAST year, only 18% of households in Southern California could afford to purchase a home. That was down from 30% one year earlier, and one can only imagine that it has continued to drop because housing prices have continued to rise. The same trend has played out in markets across the country. It is NOT the fault of "predatory lending" or "shoddy building"; exotic financing has come about because without it a very high percentage of buyers simply could not have afforded a home.

[janet-ahmad]

Shoddy or not, for the past ten years homebuilding has remained the chief indicator holding up the economy, and from the President to Congress no one wanted to disrupt the money flow. The result is the homebuilding industry grew more powerful and confident in building defective homes without consequences.

Now reminiscent of the 80%u2019s %u2013 all taxpayers are paying the price.

In this age of corporate scandal it remains to be seen if the Enrons of the homebuilding industry well ever be prosecuted for their predatory business practice that created the slums of tomorrow.
Janet Ahmad, President - HomeOwners for Better Building

[hobborg]

The massive surge in foreclosures was inevitable. The creation of the %u201Cboom%u201D and now the resulting %u201Cbust%u201D in the real estate market is the brain child of the homebuilding industry that will remain a taxpayer%u2019s burden for many years to come.

The recipe for enormous industry profits and eventual tragedy for thousands of American families and taxpayers was simple; build homes bigger, more grandiose with plenty of expensive upgrades, no down payment and innovative financing. Build them with the cheapest disposable materials and unskilled labor, while targeting first-time homebuyers who neither qualified for mortgage loans nor could they tell the difference between defective or deceptive, until they moved into their American Dream.

Top it off with a heaping portion of government insured mortgage fraud, created by big builder-owned mortgage and title companies, and imitated by other small time mortgage fraud scoundrels

Add a twist of major building industry-backed Tort Reform law aimed at weakening consumer rights. Blend Binding Mandatory Arbitration clauses in the fine print of builder contracts, which denies buyers of their constitutional right of access to the courts and the ability to hold bad builders accountable.

Voila! America has a stunning wasteland of defective homes, fraud, and shattered dreams that defies all common sense. It was a recipe for disaster.

[tx77303]

I believe that the main problem with this is that most people either purchase more than they can afford in a home which is understanable considering home builders only want to build the large expensive homes so they can make a large profit, or they try and keep within the price range but get ripped off by the builders who want to charge for evrything under the sun along with finance companies who don't care about the lendee just themselves, we live in a society of how to get rich quick.

[lsajra99]

I live in Weld County, Colorado, and am trying to sell my home. The underwriters are scrutinizing the loan and appraisal like crazy, which has caused a 3-week delay in getting the place sold, if it's actually going to happen. So yes--these things affect others in more ways than you can think of.

The problem with Weld County has been with Greeley in Northern Colorado, which at the beginning of the decade was the fastest growing metro area in the entire country at a rate of 16.8%. The rest of Colorado is also experiencing disgusting expansion of new homes everywhere...where once used to an open prairie full of prairie dogs is now brand spankin' new luxury homes.

My husband remarked that the prairie dog--which spreads out for miles here on the high plains, takes over the habitat and devastates the environment--is a symbol for what humans are doing to the Colorado open space. Sadly he seems to be right on.

[Lemonlady]

Fear Factor: Arbitration
Are you sure your family, will not join the growing ranks of the homeless? Are you sure you understand arbitration and tort reform? Are you sure that the American Arbitration Association, hasn't stealthily already entered every phase of your life? Do you think you still have the right to a trial by a jury? Do you still think you can sue anyone who wrongs you? Do you still think frivolous lawsuits are those that happen to other people? Do you tire hearing any more about big business flagrantly squashing your rights? Do your eyes glaze over and your mind shut down when you hear all these things? Are you bored by this rhetoric? Is it all just to complicated for you to understand? I understand.

But, please read on. Because you have been majority deluded, confused and overwhelmed ... just so these things will slip right by unnoticed.

If you have a new home, new car, a car lease, a Visa, Master Card, American Express, Discover card, bank account, a cell phone, a storage room, electricity or even an exterminator. YOU have given up your seventh Amendment rights. You have given up your seventh amendment rights, you cannot sue any of these people. Sounds crazy doesn't it? Well, call any of them and ask if you have an arbitration clause in your contract with them ... because you do.

[Lemonlady]

I agree with some of what you said but there is one big reason there are so many people losing their homes. It seems to be ignored, either because ignorance is strength by the powers that be -- or people do not believe it could possibly effect them.

We have more than doubled our foreclosure rates here in Texas. The numbers aren't accurate because of the investors who for the price of your power of attorney, will save your credit from a foreclosure. Most do not declare bankruptcy any more because of the new laws that also work against them. So they sell to investors or go into foreclosure.

We have filed 12,000 complaints to the AG and DA and no builder has been investigated...yet the scenario below continues every day. In Texas this month one out of every 920 homeowners will lose their homes. Please read by thoughts.... google Jordan Fogal

[brianp55]

For months, my wife was after me to consider upgrading to a larger house by taking advantage of one of these "too-good-to-be-true" financing schemes. I kept deflecting these overtures because it seemed intuitive that this couldn't possibly be a good thing, unless you wanted to get in and out very rapidly (which I did not want to do with two kids). Now, she's glad that I am risk-averse.

[aserafino]

What Everyone needs to understand is that when the housing market and the economy had a severe drop in 2001 after 9-11 rates were lowered to an all time low. People were getting 5%30 year fixed rates.This happened in 2002 and all of 2003. The lowest in 50 years. No one was crying about there interest rate then. The Real Estate Market took advatage of the consumer and drove prices through the roof. Now when that 5% interest was available there was also a 1,5,7,10 year arms available all with 4 % rates. The Caps on these loans are regulated. The loans are approved at the Caps not on the intial rate. Therefore anyone who is adjusting now is actually in a better position on their ARM than if they went into a 30 nyear fixed. Income and Jobs have not risen and if they did ever so little. Most employees didn't even recieve COLA increases. Weith the escalation of food and fuel prices which effects everything, indivdual cash flows were attacked. The fault doesnt lie with HUD FHA VA FAnnie or FREDDIE. The fault lies with in the Greedy world of the Real Estate Companies. BOOST THE PRICE. Get a better commission. They are certianly going to suffer over the next 1.5 years so I hope it was worth it to them. GREED is always the root of a real- estate issue.Wether it is the banks giving the money or agents selling the homes. ITs all speculation. Good Luck