Falling Foreclosure Rate May Increase Housing Prices


The US economy is recovering and so is the financial stability of individual households. Now more people are able to pay off their mortgage and this has resulted in much fewer foreclosures. This is certainly good news for home owners, but not necessarily for home buyers. The lower number of foreclosures works to reduce the housing market inventory even further and lower supply traditionally leads to higher prices.

Currently, there are approximately 1 million homes in foreclosure. The figure may seem high, but it is actually 23% lower compared to April 2013. This has a direct impact on the inventory in the housing market. In 2013, 5.1 million previously owned homes were sold. Initially, the forecast for 2014 was that between 0.3 and 0.8 million more previously owned homes will be sold during the year. However, at the moment, the projected trend is negative. Sales of previously owned houses are expected to decrease with 0.1 million and reach 4.9 million in total.

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The high rate of decrease of foreclosures is expected to remain. There are several major reasons for this. Many people managed to refinance at lower rates. Many become employed again. As the home values have somewhat recovered, it is now more financially beneficial to keep a previously bough house.

At the same time, as the inventory in the market drops, prices will most certainly continue to increase. The house asking prices rose by 11% on an annual basis and this trend is expected to remain. Even though the supply of new homes is projected to be 25% higher in 2014, this will most likely not put a downward pressure on house prices. This is because land will be more expensive for builders and this will push the prices of the properties which they offer up.

Overall, the home prices are expected to increase in the coming months due to the fewer foreclosures and the still small inventory.



Christian Calvin mortgage Christian is a contributing writer for Mortgage.info. He is a graduate from the University of Tennessee with a degree in Communications and a concentration in Broadcasting. Christian has served as vice-president for a privately-held company for more than 20 years. Additionally, he has also applied his writing and business knowledge to various websites with a focus on business and sports news . . . both of which are passions. Christian enjoys playing golf and spending time with his family and friends.

Contact: christian@mortgage.info

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