• Foreclosure ripple effect: 8.3 million children in jeopardy

    By Allison Linn, NBC News

    When we think of foreclosure, we tend to think of the tremendous financial toll it takes on adults. But a new report sheds light on the millions of children who are having their lives thrown into disarray by the crisis as well.

    The analysis of foreclosure data, prepared for the children’s advocacy group First Focus, finds that as many as 2.3 million children have lost their homes to foreclosure. In addition, the report finds, another 3 million are at risk being displaced from their homes due to foreclosure.

    The researchers also say that an additional 3 million kids could be affected by foreclosure because they live in a rental home that is either in foreclosure or at risk of being foreclosed upon. That means more than 8 million children are either affected or at risk.

    Julia B. Isaacs, a senior fellow with the Urban Institute and the author of the report, said a foreclosure can hurt children in several ways.

    When a school-age kid has to move unexpectedly, it often means that they must switch schools mid-year. Isaacs said other research has shown that kids who switch schools have lower levels of math and reading achievement, even after controlling for other factors such as poverty.

    Such moves also are associated with higher rates of kids dropping out of high school, and such a big upheaval can be difficult socially for children.

    The parents’ financial stress also can impact the kids. Isaacs said research dating all the way back to the Great Depression showed that when parents are under great financial stress they may be less supportive parents. That, in turn, can lead to social and behavior problems.

    “This affects how parents interact with each other and how they interact with their children,” she said.

    Isaacs’ analysis used Census data on living arrangements of families combined with estimates of foreclosures by state to come up with the estimates.

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  • How foreclosures affect buyers and sellers

    Mike Blake / Reuters

    Overview of a subdivision of single family homes in San Marcos, Calif. The nation's banks own more than 600,000 single-family homes, according to RealtyTrac.

    By Marcie Geffner, bankrate.com

    If anything is certain about the foreclosure crisis, it's that it isn't over. That fact has important implications, not only for people losing their homes, but also for those planning to sell or buy a home this year.

    As of January, about 3 million properties were in foreclosure, headed that way or already owned by banks, according to CoreLogic, an information, analytics and business services company in Santa Ana, Calif.

    Approximately 1.6 million of those homes were believed to be within the so-called shadow inventory, a supply of foreclosure properties not yet listed for sale. It's a major stumbling block to a housing recovery, says Mark Fleming, chief economist of CoreLogic.

    "It puts downward pressure on home prices, which hurts home sales and building activity," Fleming said in a statement.

    Given that prelude, here's what sellers and buyers can expect.

    Price

    Foreclosures and short sales have widened the gap between sellers' and buyers' perceptions of prices. Sellers "think their home is worth more than it really is" and buyers "think the prices are too high," says Louis Cammarosano, general manager at HomeGain, a real estate information website in Emeryville, Calif.

    One cause of that gap is realty brokers' tendency to scrub foreclosures and short sales from comparable sales data used to set sellers' asking prices. While sellers might feel a moral justification for that approach, Cammarosano says it's "disingenuous" because the status of the seller's mortgage isn't important to buyers.

    "(Just because) you happen to be paying your mortgage, that doesn't mean the buyer has to step into your shoes and pay your inflated price," he says.

    Interest rates

    Traditionally, mortgage rates have been something of a wild card for homebuyers. But that's not the case today because the Federal Reserve has announced its intention to keep rates low at least through late 2014. That's not a guarantee, but it has taken some of the urgency out of homebuying and put more buyers into a wait-and-see pattern.

    "The perception that prices could go lower, a lot of foreclosures in the pipeline and (the expectation) that rates will remain low -- that's certainly keeping some people on the sidelines," Cammarosano says.

    Location

    Buyers might be reluctant to purchase a home in a neighborhood plagued by foreclosures and short sales. But Stephen Israel, president of Buyer's Edge Co., a real estate brokerage in Bethesda, Md., says buyers can take a clue from real estate investors who are looking at areas that have been hard hit, yet might be prime for a turnaround.

    "Investors are interested in neighborhoods that were beat up by foreclosures and that have other redeeming features that they then believe will be the first to bounce back," he says.

    Those redeeming features might include easy access to public transportation, well-regarded schools, attractive shopping centers and other positive infrastructure elements. Neighborhoods that have such amenities can be "really interesting pockets, where there could be some very good values," Israel says.

    Condition  

    Foreclosure and short sale homes are often, though not always, in worse shape than other homes on the market. That's especially problematic for buyers if a home has been vacant a long time because neglect can result in problems in plumbing, heating, cooling, electrical and other systems.

    "There is a big difference," Israel says, "between a property that has been vacant a few weeks and one that has been vacant a year or more."

    A home that's in poor shape might not be a bad buy if the buyer understands the risks, he adds.

    Sometimes, though, those risks can be difficult to assess if the term of vacancy isn't known or the water, sewer, electricity and gas have been shut off. The utilities not being in service is "an interesting part of this equation that people miss all the time," Israel says.

    Buy or sell

    The bottom line for buyers is that they need to "buy smart," to use Israel's term, researching neighborhoods and being aware of a home's actual condition beyond its cosmetic appearance.

    The bottom line for sellers, Cammarosano says, is that they need to get serious about pricing, cleaning, decluttering, staging and improving the value and desirability of their home.

    "That's getting real," he says. "And if that's not what you want, don't sell it."

    More from Bankrate.com

     

  • Good Graph Friday: Foreclosure sales on the rise

    The monthly pace of "distressed" home sales is on the way up.

    If you're wondering why the housing market is still stuck in its worst slide in six decades, this chart pretty much says it all.

    Though the market peaked in 2006, the toxic mortgages that have created this mess had two- and three-year fuses before they began exploding in 2007. Those interest rate "resets" created the initial wave of foreclosures and helped push the economy into recession.

    As the recession took hold and unemployment soared, families with perfectly good mortgages - who had lost their paychecks - began losing their homes in bigger numbers.

    The pace eased up somewhat in late 2008, in large part as lenders put foreclosures on hold to see what kind of relief the government would come up with. But neither the government's programs nor the lending industry's voluntary "solutions" have done anything to bend the curve lower.

    Unless that changes, expect the housing market to continue to struggle under the weight of millions more "distressed" sales as banks repossess homes and put them back on the already-weak market. Some 3.5 million foreclosed homes have been sold since 2003, and there are at least that many more expected. One estimate puts the number of homes at risk at 11 million - or about one-fifth of U.S. home mortgages.

  • Home sales data: lipstick on a pig

    “Been down so long, it looks like up to me,” sang Memphis bluesman Walter “Furry” Lewis.

    The song was recorded in 1928, but Lewis may as well have been singing about the U.S. housing market circa 2010.

    The headline on the latest monthly sales report for existing homes looks pretty good: traffic in September picked up a full 10 percent from the month before. On a percentage basis, the gain was spectacular – the biggest monthly increase in 28 years.

    But that’s about as far as the good news goes.

    The upturn – which still leaves home sales at levels 19 percent lower than a year ago – represents a snapback after a steep plunge this summer. After the government’s temporary tax credit for first time home buyers expired in June, existing home sales fell to the lowest level in 16 years.

    With those tax credits gone, the housing market is again struggling against the headwinds of high unemployment, falling prices, a glut of unsold homes and a wave of foreclosures that shows little sign of letting up. Recent disclosures by lenders of a paperwork quagmire, along with an investigation by all 50 states into foreclosure practices, have further clouded the outlook.

    Despite the September rebound, the annual rate of existing home sales was 36 percent below the peak pace in 2005.

    “We doubt that (the September increase) is the start of a real recovery, which may now be further delayed by the foreclosure crisis,” said Paul Dales, U.S. economist at Capital Economics, in a note to clients Monday.

    While sales bounced off summer lows, home prices have been sliding since June. Last month, the median sale price was $171,700, down 2.4 percent from the same month year ago. That’s six percent lower than June, 2010. With foreclosed houses weighing on prices, and millions more in the foreclosure pipeline, the price slump will likely continue, according to Dales.

    “Prices will remain under downward pressure until demand moves back in line with supply," he wrote. "That's going to take years, rather than months."