Homeowners donâ€™t like to see abandoned houses on their block. Zombie foreclosuresâ€”vacated homes that have yet to complete the foreclosure processâ€”can be more than an eyesore. They may also attract crime and lower surrounding home prices.
If youâ€™re shopping for a mortgage loan and a home, thereâ€™s good news on this front. Foreclosure rates are falling fast.Click to see today's rates (Mar 28th, 2017)
Fresh numbers from ATTOM Data Solutions show that foreclosure activity nationally plunged to a 10-year low in 2016. Looking closer, the U.S. foreclosure rate dropped by 30 percent last year.
Thatâ€™s the most improvement of any year on record, according to Black Knight Financial Services. December 2016's 59,700 foreclosure starts marked an amazing 24 percent decrease from the same period a year earlier.
Foreclosure filings surpassed 2.8 million in 2010. Last year, they tallied 933,045. Thatâ€™s a sign that the housing market is in much better shape today than a few years ago.
Daren Blomquist, senior vice president for ATTOM Data Solutions, says foreclosure filings are down for two reasons.
First, since the last housing bubble, there are fewer â€ślegacyâ€ť foreclosuresâ€”meaning homes in the foreclosure process withÂ loans originated between 2004 and 2008.
â€śMost legacy foreclosures have either been already foreclosed on or resolved in some other way, such as refinancing, modification or short sale,â€ť says Blomquist.
Second, â€śloans originated over the past seven years are holding up well, with default rates below historically normal levels,â€ť he adds.
Lower foreclosure rates are a positive for real estate, both nationally and in local markets.
â€śItâ€™s good news that the market in most areas is not dealing with the uncertainty of a high share of distressed properties competing with regular sales,â€ť notes Blomquist.
â€śThis leads to a healthier and normal real estate ecosystem. Home prices are steadily rising over the long-term, and home builders are more confident to create extra supply without fear of having to compete with foreclosures.â€ť
Ultimately, that should help restore balance to the supply-demand equation, he says.Click to see today's rates (Mar 28th, 2017)
A home isnâ€™t just a roof over your head. It can also be a wise investment that repays you in the form of equity earned over time and likely higher value when itâ€™s time to sell.
But foreclosure homes on your block can decrease the value of this investment.
Thatâ€™s because higher foreclosure rates negatively affect home prices, research shows. A report by MIT and Harvard revealed that foreclosures can drag down prices of other houses for sale within a quarter mile.
Foreclosures may increase property tax rates in your area, too. In 2014, RealtyTrac estimated that over $400 million in property tax revenue was likely delinquent across America due to zombie foreclosures.
In addition, lower foreclosure rates may lead to lower crime in the area. Thatâ€™s whatâ€™s suggested in a 2015 report submitted to the U.S. Department of Justice and a 2010 study by the FDIC.
The latter estimates that a one percentage point increase in foreclosure rates increases burglary rates by over 10 percent.
Of course, the not-so-good news is that fewer foreclosures means scarcer chances to score a low price on a distressed property. The MIT/Harvard study concluded that a foreclosure decreases prices on those homes by 27 percent, on average.
Home prices continue to rise nationally. As a result, many buyers on a budget look to bargains. A lower number of foreclosure, short sale, and REO (bank-owned) properties on the market reduces prospects for scoring a discounted deal.
Blomquist says decreased foreclosure rates could further signify restricted access to credit. And these credit restrictions could limit your ability to own a home.
â€śFor the housing market to continue to grow, we may need to see slightly higher foreclosure rates, as crazy as that sounds,â€ť Blomquist says.
â€śThat would indicate credit standards are loosening a bit. And that would open up the homeownership market to a wider pool of buyers who can spur continued growth in the real estate market.â€ť
Regardless of the state of foreclosures, now remains an ideal time to reel in a great deal on a mortgage and home purchase. First, however, plan to do your homework.
â€śDo what you can to save up for a more sizeable down payment. This will help with the loan rate and terms and also result in a lower monthly house payment,â€ť says Blomquist.
That may mean some short-term sacrifices, â€śsuch as living with parents, not getting into debt on depreciating assets like cars, and cutting back on other disposable income spending,â€ť he adds.
Today's mortgage rates depend on the product you choose and the strength of your application. Current rates mostly range between three and 4.5 percent for ARM and fixed mortgages.Click to see today's rates (Mar 28th, 2017)
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2017 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)