Join our Mailing List!
Please click the link below to sign up for your community paper mailing list. Stay up to date with all the events going on in your community as well as the latest news.Sign Up Today!
Housing industry is in for a long struggle
Home building has dramatically dropped, foreclosures are spiraling upward|COLUMN
By: Gene Hanson
When the home-building industry hits the skids as it has for the past year, it is reason for worry because so many related industries are affected.
But when the rate of foreclosures skyrockets, it means there is something seriously wrong with the way business is conducted in the buying and selling of homes.
Records from the Clay County recorder of deeds office shows that home foreclosures have been spiraling upward since 2005, and there are no signs that the trend is slowing.
In 2005, for example, the number of foreclosures stood at 436. In 2006, the number rose to 695, up almost 60 percent. In 2007, the numbers have continued to climb, and will reach or surpass 1,000.
Similar percentages are seen in Platte County, where foreclosures went from 131 in 2005 to 200 in 2006, and for the first four and a half months of 2007, there were 84.
Nationally, 176,000 notices of foreclosures were sent out in May, the highest number ever recorded, and 90 percent more than a year ago.
While the Kansas City area has had the luxury of being insulated from the pitfalls in the home-building and home-mortgage industry nationwide, it is clear now that what is happening elsewhere is also happening here.
The reasons can vary — loss of a job, loss of a spouse, unexpected medical bills and other factors.
But that's not all. Some responsibility can be placed at the doorstep of the sub-prime mortgage industry, where homebuyers with questionable credit have secured loans with high interest rates. There are the adjustable mortgages where interest rates go up, payments balloon, and homeowners find they cannot make the payments. Many got their loans from high-risk lenders who approved home mortgages during the height of the housing bubble.
The true impact of that really has not been felt yet. A cursory look at some Web sites can show the tale of the numbers.
Realtytrac.com shows pending foreclosure numbers much higher than those in the recorder of deeds office. They show data that includes notices of default, notices of pending legal actions against property owners, notices of trustee sales and repossessions by lenders.
A similar Web site, Foreclosures.com, shows similar numbers. Both Web sites, which track home foreclosure activity by county and by ZIP code, show that a growing number of homeowners are in jeopardy of losing their homes, particularly first-timer borrowers who have yet to build up any equity.
Six of the nation's largest lenders who specialized in the high-risk lending business filed for bankruptcy earlier this year after investors lost confidence in the $600 billion sub-prime market and default rates started to rise.
We have not seen the overall effect of home-building and home-mortgage industry problems. But here are a few indicators.
The fed has tightened restrictions on the home-loan business, particularly on predatory lending practices. The home-building-supply industry went from a high when the boom hit its peak, along with the demands for building supplies brought by Hurricane Katrina, to a major bust. Suppliers like Lowe's and Home Depot have seen their business drop dramatically.
In addition, home foreclosures have added to the already bloated inventory of unsold homes.
The good news is that it's a buyer's market and likely to stay that way for a while. The rest is all bad news for the economy, and likely to get worse before it gets better.
Business Editor Gene Hanson can be reached at 389-6638 or ghanson@npgco.com.
printable version
e-mail this story
But when the rate of foreclosures skyrockets, it means there is something seriously wrong with the way business is conducted in the buying and selling of homes.
Records from the Clay County recorder of deeds office shows that home foreclosures have been spiraling upward since 2005, and there are no signs that the trend is slowing.
In 2005, for example, the number of foreclosures stood at 436. In 2006, the number rose to 695, up almost 60 percent. In 2007, the numbers have continued to climb, and will reach or surpass 1,000.
Similar percentages are seen in Platte County, where foreclosures went from 131 in 2005 to 200 in 2006, and for the first four and a half months of 2007, there were 84.
Nationally, 176,000 notices of foreclosures were sent out in May, the highest number ever recorded, and 90 percent more than a year ago.
While the Kansas City area has had the luxury of being insulated from the pitfalls in the home-building and home-mortgage industry nationwide, it is clear now that what is happening elsewhere is also happening here.
The reasons can vary — loss of a job, loss of a spouse, unexpected medical bills and other factors.
But that's not all. Some responsibility can be placed at the doorstep of the sub-prime mortgage industry, where homebuyers with questionable credit have secured loans with high interest rates. There are the adjustable mortgages where interest rates go up, payments balloon, and homeowners find they cannot make the payments. Many got their loans from high-risk lenders who approved home mortgages during the height of the housing bubble.
The true impact of that really has not been felt yet. A cursory look at some Web sites can show the tale of the numbers.
Realtytrac.com shows pending foreclosure numbers much higher than those in the recorder of deeds office. They show data that includes notices of default, notices of pending legal actions against property owners, notices of trustee sales and repossessions by lenders.
A similar Web site, Foreclosures.com, shows similar numbers. Both Web sites, which track home foreclosure activity by county and by ZIP code, show that a growing number of homeowners are in jeopardy of losing their homes, particularly first-timer borrowers who have yet to build up any equity.
Six of the nation's largest lenders who specialized in the high-risk lending business filed for bankruptcy earlier this year after investors lost confidence in the $600 billion sub-prime market and default rates started to rise.
We have not seen the overall effect of home-building and home-mortgage industry problems. But here are a few indicators.
The fed has tightened restrictions on the home-loan business, particularly on predatory lending practices. The home-building-supply industry went from a high when the boom hit its peak, along with the demands for building supplies brought by Hurricane Katrina, to a major bust. Suppliers like Lowe's and Home Depot have seen their business drop dramatically.
In addition, home foreclosures have added to the already bloated inventory of unsold homes.
The good news is that it's a buyer's market and likely to stay that way for a while. The rest is all bad news for the economy, and likely to get worse before it gets better.
Business Editor Gene Hanson can be reached at 389-6638 or ghanson@npgco.com.