The latest statistics show that the nation’s mortgage crisis has nearly reached the breaking point.
Figures indicate the number of Americans who fell behind on their mortgage payments increased to a 20-year high in the 3rd quarter of the year.
The crisis seems to be the result of the fact that many homeowners found themselves unable to sell or refinance their houses.
The delinquencies increased to 5.59%, which was the highest such figure since the year 1986, according to a report by the Mortgage Bankers Association. Meanwhile, foreclosures hit a record high for the 2nd consecutive quarter.
Because of all the foreclosures, there’s a glut of available houses on the market. Sales of both new and existing homes are expected to decrease to 5.09 million in 2008. That would be 32% below the 2005 high of 7.46 million. At the same time, lenders are tightening standards for homeowner loans, making it more difficult for prospective buyers to purchase homes.
However, the Bush Administration is trying to alleviate the crisis through a 5-year freeze on some subprime loan rates. Numerous homeowners might be in danger of losing their homes were it not for the freeze.
Approximately 20% of adjustable rate subprime loans experienced late payments during the quarter.
The crisis appears to be worst in California and Florida, two states that have been hard-hit by the housing slump. Meanwhile, housing permits in the U.S. have dropped 5 consecutive months, decreasing to a 14-year low, according to a report by the U.S. Commerce Department.
Housing experts do not expect an end to the current housing mess until the middle of 2008. It’s unclear at this point, however, whether the housing crunch will lead to an all-out recession. Officials with the Federal Reserve Board have said they plan to do everything possible to keep recession at bay.
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