Page last updated at 08:58 GMT, Tuesday, 16 June 2009 09:58 UK

New wave of foreclosures hits US

A foreclosed home

By Greg Wood,
BBC North America Business Correspondent, New Haven, Connecticut

New Haven is a place of contrasts. On the seashore just a few miles outside the centre of this New England town, you'll find multi-million dollar properties with stunning views of Long Island Sound. But in the rundown urban areas it is a landscape of boarded up houses.

The range of properties in the area - from the desirable to the unwanted - makes it a good place to take the pulse of the US housing market.

Some commentators have detected signs of life returning. But that seems premature.

"What I'm finding is that sales are dropping off and there's an increasing supply of the housing inventory," says Gene Picka, a real estate agent at Remax Alliance in nearby East Haven.

A foreclosed home in New England
In March they resumed foreclosures. The cancer hasn't gone away. In fact, it's further advanced.
New Haven bankruptcy lawyer Neil Crane

"In some of the towns I'm seeing anywhere between one to two years supply of unsold homes."

The latest figures show that the average selling price of a single family home in Connecticut is $227,500 (£139,250), down 13.5% on a year ago.

That is a slower rate of decline than just a few months back, indicating that prices are bottoming out.

But sales in April were the lowest for that month since 1987. A total of 1,528 properties changed hands throughout the state, down 21% on the same month a year ago.

And foreclosures - repossessions - which had been falling in the early part of the year, have suddenly spiked up again. In Connecticut, 2,174 homes were foreclosed in April, a rise of 25%.

Falling behind

Two factors have caused this rise in foreclosures. The unemployment rate in the US has jumped to over 9% in the past six months and it is still heading upwards.

Wayne Parks outside his home
It's tough. You try not to get too emotional. But there are memories here and that's difficult.
Wayne Parks, who is about to lose his home

This means that millions more homeowners are now unable to afford their mortgage payments.

And lenders have become more aggressive in making repossessions.

"In January and February the banks stopped doing foreclosures for political reasons," says Neil Crane, a bankruptcy lawyer in New Haven.

"They were being questioned at Congressional hearings in Washington. It was good PR.

"In March they resumed foreclosures. There's now a backlog of defaulted mortgages. The cancer hasn't gone away. In fact, it's further advanced."

Tough times

Wayne Parks is being repossessed in a few weeks time.

TAKING THE PULSE OF THE GLOBAL ECONOMY
The BBC is Taking the Pulse of the Global Economy, looking at a range of subjects this summer
Food prices - which remain a concern particularly in many developing economies
Highly volatile energy prices - which have been a major issue in the past year
The plight of migrant workers - as the global recession takes hold in many economies
Housing markets - which have turned from boom to bust in many countries
Rising unemployment levels - as firms cut back because of falling orders

He built his house in nearby Fairfield with his own hands 13 years ago. But his construction business folded when the property market collapsed.

Wayne has filed for bankruptcy. The family is now looking for rented accommodation.

"It's tough," says Wayne. "You try not to get too emotional. But there are memories here and that's difficult.

"We carved our names in the concrete every time we poured something. My father passed away here.

"But this is the way it goes. It's my fault. I brought it upon myself. You have to take the emotion out of it otherwise you'll go crazy."

The rise in the number of foreclosures means that many more unsold houses will flood on to the market, postponing any chances of recovery.

What's more, the interest rates on US Treasury bonds, which determine the rates paid on mortgages, have risen sharply in the past month. So home loans will become more expensive and difficult to afford.

There are a few parts of the United States where the housing market is looking a bit more active.

But on the evidence of this fairly typical New England state, there is no recovery yet and there won't be one for at least the rest of this year.



Print Sponsor


RELATED BBC LINKS


FEATURES, VIEWS, ANALYSIS
Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit

BBC navigation

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.

Americas Africa Europe Middle East South Asia Asia Pacific