The Great Foreclosure Scare - Don't Get Sucked In!
If you've been watching the news with any regularity, undoubtedly you've heard some frightening news about an out-of-control foreclosure rate sweeping across the country. The talking heads on TV and radio and the writers for your favorite news magazine or daily paper would have you believe that you are in danger of losing your home. And even if your home is safe, certainly your neighbor is about to be thrown into the street because the creditors are coming after his.
Don't believe the hype! There is no doubt that foreclosures are up over previous years and have become a real problem in some locations, but they are not going to destroy the economy or the real estate market (especially here in Middle Tennessee) unless we allow ourselves to be scared into not buying or selling real estate.
Just check out this article to see the kind of tactics the media is using to scare us all silly. The opening sentence proclaims: "The number of U.S. homes heading toward foreclosure more than doubled in the first quarter from a year earlier." While that statement may be true, as you'll see in a moment, it paints the situation in the worst possible light with uneccessary hyperbole.
Let's take a closer look at the numbers cited in the article.
In the first quarter of this year, one out of every 194 homes received a foreclosure filing, which was more than double the number of filings in the first quarter last year. Let's say this another way. In the first quarter 99.5% of homeowners did NOT receive a foreclosure filing, which was down from about 99.75% in the same period of 2007.
Here's another misleading statement from the article. "Nearly 157,000 properties were repossessed by lenders nationwide during the quarter..." If about 650,000 is 0.5% of all homes (based on numbers from the article), that means that a mere 0.12% of homes were actually foreclosed in the first quarter of 2008 or 99.88% of homes were NOT foreclosed.
Here's our point: the media can grab a story and sensationalize it completely out of proportion. Foreclosures ARE up more than 100%, BUT the rate of foreclosure filings is not as big as some would have you believe. We are experiencing a record number of foreclosures, but most average Americans are not about to lose their homes. Right now we are on pace in 2008 for a foreclosure filing rate of 2% with less than one percent of homes actually being repossessed.
Certainly one foreclosure is too many, but clearly there is no reason to buy into the panic the media is trying to sell you.