MercoPress. South Atlantic News Agency

Record peak of US home foreclosures in fourth quarter 2007

The number of US home foreclosures, and the rate of homes entering the process, reached record highs in the fourth quarter of 2007, according to the US Mortgage Bankers Association.

The data shows the failing loans rate was led by an increasing number of sub-prime borrowers unable to make payments. A record 0.83% of loans entered the foreclosure process. The delinquency rate, of missed payments, was 5.82%. However pending home sales saw no change in January, which is interpreted a small glimmer of stability. The index compiled by the National Association of Realtors measures deals where a buyer has signed a contract but the sale is yet to be closed. It is a key measure of future home sales activity, which is why the unchanged figure - coming after a 1.5% fall in the previous month - is being seen a potentially positive sign. Meanwhile, the rate of failing loans increased across most mortgage types, particularly in the sub-prime borrowers, adding to the supply of unsold homes putting downward pressure on prices. The Federal Reserve revealed that the percentage of equity Americans have in their homes has fallen below 50% for the first time since 1945. Homeowners' share of home equity fell to 47.9% in the in the fourth quarter of 2007. The percentage of debt people still own on their properties now represents more than half its value. This could be because of people taking out large mortgages on more expensive properties, of because of equity-release loans increasing in recent years. Many analysts have predicted that prices will continue to fall in 2008 as builders struggle to sell a glut of new properties, many of them coming on to the market as a result of foreclosures. The worry is that falling home prices and higher mortgage repayment costs will lead to an increase in home repossessions. This in turn could constrain US consumer spending, which in turn could cause the US economy to contract.