Abstract: Foreclosures are at their highest in 50 years but there is little point in appointing blame if we cannot come up with a concrete, immediate solution.

It is human nature to look for a scapegoat the moment things begin to go wrong and the current situation with the foreclosure market in the US real estate scene is no different. The results coming in from different lenders across every state in the US indicate that foreclosures are at an all-time high.

Certainly this century has also been one for records in the real estate market with home prices setting records for many consecutive months and the number of home owners, in itself, reaching a record high, so it is not that surprising that foreclosures, the flip side of the heady home ownership coin, are also breaking records.

This does not answer the question who is to blame though. Let’s examine the equation a little more closely. Lenders, who are at their most efficient and profitable when they are lending money and receiving payments, are, generally speaking, reluctant to foreclosure on a property and take ownership unless they are getting nervous that the home owner can no longer make payments and delay is going to result in further losses for the lender.

Homeowners have been leveraging their house equity and ability to readily borrow money for the last decade now so it comes as little surprise that quite a few of them in the sub-prime mortgage market find themselves over-stretched.

The Federal Reserve Bank has been trying to curb spending and inflation in the economy through the longest period of interest rate hikes this century, they have, seemingly, succeeded but have managed to over-expose those borrowers who had borrowed to the hilt in order to buy a property.

In the blame game it would be easy to start with the borrowers who keep on borrowing and cannot stop spending, take lenders in our stride, particularly as it is becoming increasingly obvious that mane have been sailing a little too close to the wind for comfort when it comes to the transparency of charges in the loans they were offering to borrowers and end up with the Federal Reserve intent on keeping the economy from overheating at any cost.

None of this would serve to undo what has been done. What is important now is how do we make sure the real estate market does not suffer and foreclosures do not exceed the norm?

President Bush and members  of Congress have appealed to the mortgage industry to lower rates, and the industry says it is working with struggling homeowners. Now, the top prosecutors in 37 states are putting more direct pressure on lenders to open communication lines and not force foreclosure on struggling homeowners. The trick here is on communication and flexibility.

If lenders manage to keep their nerve and not force foreclosures in fear of losing even more money as the real estate market slumps and house prices drop then all this is but a blimp as we head towards the golden promise of a 21st century where house equity and house prices keep on growing at a steady rate.

Abstract: The median price per square foot in the purchase or sale of a home is the weather vane of the real estate market, foreclosures are affecting this powerful indicator, but overall the news is not as bad as it appears.

The median price per square foot is a vital barometer of the overall state of health of the real estate market. Here’s why: First builders and developers use it in order to estimate their costs and return on investment in new properties they build and older properties they acquire, re-model and sell on.

Second, home buyers use it to determine their budgets and buying power.

Third, it is used by Realtors as a barometer if the way the market is heading so that they can calculate what is happening and what the overall trend is.

Fourth, it is used by appraisers and lenders as a means of calculating the value of a home against a loan or early sale.

Fifth, it is used by foreclosure experts who use it to calculate the bargaining power they have.

For all of these reasons the moment the median price goes up or down the market as a whole shifts accordingly to compensate. At the moment in Seattle, for example, the news is that the median price per square foot fell by a whole $3.00 from $240 (which, incidentally was a record high) to $237.00.

It is tempting to read too much in this shift and argue that the market is in decline, values are dropping and the real estate market is shrinking, but then when we actually remember that it is still above last year’s levels we realise that the perceived shrink is against current price performance level expectations which may be unrealistic, rather than a decline as such.

In addition to this the fact that the foreclosures hitting the market are releasing house stock which is selling well below its market value and therefore well below the per square foot price it would get if it was sold through normal channels, must indicate that the value of homes is still rising otherwise the per square foot drop would have been a lot steeper.

All this becomes relevant only if you are thinking of selling your house or buying a home. Unless there is an urgent need to sell a house waiting for foreclosures to settle and the market to find an even keel again will only benefit you. If you are buying perhaps now is the time to find a real bargain in either a brand new home or one of many bargains hitting the market as part of the property foreclosure sales.

Foreclosures are a hot item at the moment with a lot of attention being given to the fact that they appear to be on the increase. Foreclosures also play a vital part in stimulating the housing market by allowing new home owners to come in at a level which perhaps they would not otherwise afford. As long as they do not get out of hand and start having a negative impact on the market then they are nothing to worry about.

Abstract: New home sales figures are the lowest they have been for fifteen years but this may not necessarily be a valid reason for worrying.

There is always a risk analysing real estate sales on a month-by-month, year-by-year basis precisely because the underlying factors are fluid and nothing is really the same in the comparisons. However it is always important to understand the state of the market and until a better way presents itself this will have to suffice.

With sales of new homes in the Seattle area the lowest in five years it might be tempting to say that yes, the housing market is slowing down. Pundits have even began contemplating the dreaded ‘R’ word in relation to the economy.

I am going out on a limb here but my guess is that the economy is as far away from a recession as it has ever been and that while new home sales figures may be slow buyers are just taking longer to pick new homes for two distinct but related reasons:

First foreclosures are beginning to bring into the market a steady stream of homes which can be picked up at a bargain price. Homes which are brought to the market as a result of foreclosure are more complicated to sell, the buyer needs to line up credit and a survey needs to be done if it hasn’t already and because the homes are almost always in less than perfect condition buyers tend to take longer to make up their mind as they weigh up all the options available to them.

Lenders also are more careful these days. They take longer to line up credit, carry out all the due diligence checks they need to and are less eager to accept self-certified borrowers because this has been one of the causes which have led us to the current state of the market here.

So, what is the real picture you are going to ask me. While it is true that overall new home sales are down compared to the same month’s figures of a year ago we have to take into account the factor of foreclosure releasing a lot of competitively priced properties in the market plus the length of time required to complete a purchase.

The real estate market has slowed down a little in terms of growth but it is not shrinking by a long shot. As we are heading towards the end of year the figures will begin to rally a little and there will be a partial recovery. It is safe to say perhaps that the real estate market will be like this for some time as lenders and borrowers try to avoid the mistakes which have led to the current level of foreclosures and that, in my book, is a good thing to happen for everyone concerned.