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Just how bad is the housing market?

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What's more, the underlying causes of housing market distress differed even among the most harshly impacted states, according to CoreLogic's January 2008 forecast of U.S. residential mortgage risk.

In California, the primary factors were "significant declines in home prices, increasing foreclosure rates, a relatively high proportion of nonconforming Alt-A and subprime adjustable-rate mortgages, low housing affordability and investor speculation that boosted housing demand."

But in Michigan, "persistent economic distress and a high incidence of mortgage fraud" were at work, according to the forecast.

Data collection and analysis aren't perfect
Finally, all of this data is subject to myriad material limitations in collection and analysis. Foreclosure figures are compiled from public records, which are stored in systems that may be arcane or antiquated, and are fragmented among some 3,140 counties across the country, Sharga says.

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"Everyone is wringing their hands and saying it's unacceptable that we don't have a national database and asking why don't we have access to these numbers. And as soon as this cycle is over, no one will want to spend any tax dollars on updating a system that they really don't need right (then)," he says.

The situation isn't much better with respect to mortgage data, which is sometimes extrapolated from surveys of lenders, Sharga says. Loan types may be buried deep in mountains of documents, and no one keeps track of such statistics as how many homeowners have made only minimum payments on payment-option mortgages. Property records may show first and second liens, but won't include any negative amortization or late fees that may have accumulated on a loan. And even if all of the data are valid, it's still a considerable challenge to correlate data fields from disparate sources.

Should you be worried?
The dramatic increase in foreclosures, if it continues, may have a severely negative impact on the U.S. economy because housing is one of the nation's largest economic sectors. But surprisingly little national housing data can be applied to individual homeowners. Indeed, Sharga says, the average person can "pretty much ignore" most of the broad-based data.

"National numbers show trends that are developing or changing, but they don't apply to you personally as a homeowner," he says.

The best advice has been stated and restated, yet remains good advice nonetheless. If you have an adjustable-rate mortgage, find out how much you owe, when your interest rate will reset and how much your new payments will be. If you won't be able to afford those payments, contact your lender as soon as possible to discuss any other options that may be open to you.

"Act before you find yourself delinquent," Sharga says "If you wait until you are in trouble, it may be too late."

Bankrate.com's corrections policy -- Posted: Feb. 21, 2008
 
 
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