If you still read the dead-tree version of the News Sentinel, you may have noticed page after page of densely stacked agate legal type over the last several months announcing the foreclosure of the American dream for hundreds of our fellow citizens.
Just how bad is it?
From Jan. 1 of this year until Aug. 1, there were 846 foreclosures on property, business and residential, in Knox County. In the halcyon days of 2006, during the same period, there were 564 foreclosures. That's a 50 percent increase in the number of foreclosures for a seven-month period.
Should you think 2006 was an anomaly with lower than average foreclosures, the number of foreclosures for the first seven months of 2007 was a remarkably consistent 563. Go back to 2005 and foreclosures for the first seven months were 531. The 846 foreclosures during the first seven months of this year represent a huge quantifiable jump.
If you look at the numbers, you see that the real estate market in Knoxville went to hell in 2008 and hasn't recovered so far this year. The total amount of real estate transacted in Knox County in 2007 was $3.2 billion. The number for 2008 dropped to $2.1 billion. That's a $1 billion decrease in real estate transactions. Factor in real estate commissions, mortgage fees, and title company billings and you can see that the people who work in the assembly line of real estate transactions also took a major hit. Not to mention the home builders and building contractors.
Is it getting any better? For the first seven months of 2007, total real estate transactions were a little over $2 billion. For the first seven months of this year? It's $874 million. That's a decrease of over $1 billion in just seven months. It's more than the decrease for all of 2007.
If your eyes are starting to glaze over at the numbers about now, consider some shorthand. Foreclosures are up 50 percent and the amount of real estate sold is down 50 percent. People who own houses are losing them at an alarming rate and the number of people buying houses is in a steep decline.
Foreclosed properties are included in the total real-estate transaction figures, so they account for some of the property that did sell. And the reduction in total money isn't a result of a collapse in prices. It is fewer real-estate parcels changing hands; the number of deeds recorded is way off.
You hear that mortgage rates are really low. Well, maybe.
But the mortgage industry has gotten in touch with reality. What you pay now bears some relation to your ability to pay it back. The more you put down, the better the rate. If you have a credit score of 740 or higher, you might get a rate at 5.75 percent. If your score is lower, then you are probably looking at well over 6 percent. The rate you pay now is based on the risk and amount of the loan. Loans that used to close in 14 to 30 days now are more likely to close in 45 to 60 days. You have to turn in more documentation. As someone in the business puts it, it's like trying to get a loan at (the notoriously conservative) Home Federal 25 years ago.
Will it get better? It's not as bad as it was in 1980. Economists confidently predicted at the time that anyone who didn't already own a house (with equity) would probably never own one. But from the mid-1980s to now we have had the greatest boom in people owning their own homes in the history of the world.
But perhaps going forward we will be a little more careful and only buy things we can pay for.
(My thanks to Register of Deeds Sherry Witt and her computer-savvy Chief Deputy Nick McBride. I ask them for the raw data, number of foreclosures and total real estate transactions for each month from January 2005 through July of 2009. The interpretation and conclusions reached from the data are my own, including the arithmetic, so if you disagree with my analysis don't blame them.)