Foreclosures almost double in October

US foreclosures continue to increase primarily due to ARM resets. As mentioned in earlier posts the ARM increases will peak over the next several quarters so additional pressures on housing should persist.

Bank repossessions increased 35 percent, providing “evidence that more homeowners who enter foreclosure are losing their homes,” James Saccacio, chief executive officer of RealtyTrac, said in a statement. The Irvine, California-based seller of foreclosure data has a database of more than 1 million U.S. properties.

Foreclosures are adding to an 11-month supply of unsold homes, the highest in more than eight years, in the worst U.S. housing slump in 16 years. The declines in home sales and prices have raised concerns consumer spending may drop and push the world’s biggest economy into recession.

Existing home sales fell to the lowest annual rate since 1999 while home prices declined in the third quarter. The decline in home prices was the first since 1994 as a combination of foreclosures and ongoing mortgage tightening impact the consumer. Home delinquencies have risen to a five-year high and 40 percent of U.S. lenders have raised their standards on mortgages for prime borrowers, their most creditworthy customers, according to Federal Reserve data.

My comments: Expect home equity withdrawals to contract significantly as collateral values decline in 2008. Since the consumer is 70% of the economy is it fair to say a recession is upon us?

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