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By Jennifer Yousfi
There's more bad news ahead for the U.S. economy as home foreclosures continue to rise.
One out of every 483 U.S. households is at some stage of the foreclosure process, and with that many displaced or struggling homeowners, the economic recovery may well take longer than expected.
"May was the third straight month where we've seen a month-to-month increase in foreclosure activity and the 29th straight month we've seen a year-over-year increase," James J. Saccacio, chief executive officer of RealtyTrac, said in a statement.
Home foreclosures jumped 7% in May from April and are up a whopping 48% year-over-year with 261,255 filings this past month according to RealtyTrak's U.S. Foreclosure Market Report. That figure includes all homes that either received default or auction sale notices or were repossessed by the bank.
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Nevada had the highest percentage of foreclosures with California, Arizona and Florida close behind. These markets were some of the hottest during the housing boom from 2000 to 2005.
"It's definitely a different kind of market than what we got used to a couple years ago," Devin Reiss, owner of Realty 500 Reiss Corp. in Las Vegas, told Bloomberg News. "We used to sell homes in a day. Now 50% of our sales are foreclosures."
With a large supply of housing inventory already glutting the market, the influx from foreclosed homes is going to add to the housing markets woes.
Foreclosures will account for 30% of national home sales this year as 1.2 million foreclosed single-family homes will eventually enter the market, Michelle Meyer and Ethan Harris, economists at Lehman Brothers Holdings Inc. (LEH) in New York, wrote in a recent research report. They estimate foreclosed properties, which typically sell for about 20% less than other homes, will depress home prices nationally by 6%, Bloomberg reported.
Battered U.S. consumers are already struggling to deal with soaring gas and food prices. Losing the family home will tax already stretched incomes to the limits, delaying any possible recovery for the U.S. economy.
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Foreclosures Rise 48% in May as Repossessions Double