While national foreclosure rates decreased during the second quarter of 2006, it?s a different story in Maryland.
According to the Q2 U.S. Foreclosure Market Report, released Tuesday by RealtyTrac, an online marketplace for foreclosure properties, nationwide foreclosures were down by 16 percent in the second quarter compared with first-quarter 2006 figures.
In Maryland, however, there were 1,153 properties entering some stage of foreclosure during the second quarter, marking an increase of almost 7 percent over first-quarter figures. Compared with the second quarter of 2005, the increase was even greater at 16.58 percent. That means that in Maryland 1 out of every 1,858 homes was in foreclosure.
Industry experts say the increase in foreclosures is the result of buyers overextending themselves when interest rates were low, who now find themselves unable to afford their properties.
“The loan-to-value ratio is very high right now and what people are doing is they?re taking out adjustable rate mortgages, which have low teaser rates at the beginning that allow them to buy big houses,” said Deborah Ford, a finance professor atthe University of Baltimore. “When those rates go up they can?t afford it.”
Charles Dipino, president-elect of the Maryland Association of Mortgage Brokers, and a broker with Columbia-based Universal Trust Mortgage Corp., said that with home prices in Maryland at such a high level, many buyers have taken on a maximum debt level to finance their properties.
“They?re maximizing their debt ratio and their income to get into the properties,” Dipino said. “If some type of hardship comes along, they?re not prepared for it. People just don?t have the nest egg put away for emergencies anymore. They?re trying to get into the most house they can and are not leaving room for problems.”
Average home prices in the Baltimore area, which includes Baltimore City and Baltimore, Anne Arundel, Carroll, Harford and Howard counties, was $319,633 in June, according to data compiled by Metropolitan Regional Information Systems Inc.
Rick Sharga, vice president of marketing for RealtyTrac, said the increase in Maryland foreclosures is not out of the ordinary as the housing market has returned to more traditional levels.
“We?ve been in an artificially low period for foreclosure properties because of the boom,” Sharga said. “As the boom has kind of wound down, we?re returning to more normal levels of foreclosure.”
Number of Maryland foreclosures
» April 2006: 427
» May 2006: 260
» June 2006: 466
Source: RealtyTrac?s 2006 Q2 U.S. Foreclosure Market Report
