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Fed: Foreclosed Property on Sale Undermines Western Recovery

October 23, 2009

The increasing number of foreclosed property on sale has undermined the progress made for the Western region recovery, according to the September 2009 Federal Reserve Board’s San Francisco, California unit’s report on the regional economic conditions. The regional study is conducted by the agency eight times in one year.

According to the report, there was a significant improvement in the housing demand, albeit at a slow pace. The trend in the housing market was a remarkable contrast to the commercial real estate market which is eroding further.

Home sales have been increasing in some parts of the Western region, accompanied by increases in home prices. However, the report noted that the momentum of the real estate market recovery has been hindered by continuing increases in the number of foreclosed property on sale. The increasing foreclosure rates are being blamed for slowing the drop in the inventory of homes on the market for sale.

Because of the abundant supply of cheap foreclosure properties on the market, new home construction rate is slow to pick up throughout the region. Noting the trend, industry experts said that there is no or little possibility that the construction industry will experience a resurgence of activity in the near future.

Meanwhile, in the commercial real estate market, conditions continued to grow worse as demand for industrial and office space drop further and financings for new development projects and purchases remained at a standstill.

In its July report, the agency noted that conditions in the housing markets in the Western region was very weak but was showing significant signs of improvement. Even then, the report already noted the deteriorating condition in the commercial real estate market. In the same report, sales prices for existing and new houses drop further in many areas in the region while activity in the housing construction sector remained at historic low levels.

Nationwide, market data showed that the number of foreclosure filings increased by 5 percent in the third quarter of this year. This means that 937,840 homeowners received at least one foreclosure filing during the period.

In September, 343,638 foreclosed property on sale were reported, a decline of 4 percent from August but an increase of 29 percent from September of the previous year.

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