At a foreclosure auction in Bakersfield, Calif., it’s standing room only.
“It’s a tremendous business right now because of the huge amount of foreclosures coming in,” says auctioneer Sam Marshall. “We’re seeing a lot more inventory from banks that are coming to us needing to reduce inventory.”
The rate of homes beginning the foreclosure process now stands at an all-time high, according to the latest quarterly survey from the Mortgage Bankers Association. “Households who had adjustable rate loans where payments adjust upward and they’ve seen house prices decline, may find that the value of their loan is greater than the value of their house; therefore they have no equity to lose, and the incentive is to walk away,” says Doug Duncan, chief economist for the Mortgage Bankers.
States seeing the highest rates of new foreclosures are also seeing the greatest declines in home prices from a year ago. Prices are down 27% in Nevada , 25% in Florida and 14% in Arizona and California, according to the National Association of Realtors.
Boom To Bust
The price drops are a big surprise to Maryland homeowner Rick Boardman. When the tech bubble went bust in 2000, Boardman took his money out of the stock market and put it in something he thought would be safer, real estate. “We thought it was a good investment, but also something we could enjoy and might change our lifestyle too,” says Boardman.
He and his wife bought 20 acres of valuable waterfront property in Maryland confident it would turn an easy profit. Boardman remembers the summer of 200 as a time when "everything was just boom, boom, boom, especially on the eastern shore.”
Boardman built two homes; one to sell, which would finance the other, his dream home. But the $2 million home has been on the market for over a year, and Boardman can’t make the mortgage payments anymore. Work on his dream home stopped. “What was our dream has become a financial nightmare. Our goal now is just to get out with something to pay off the debt,” says Boardman. “We’ve come to the absolute end of the road.”