I recently saw an article in USAToday that said “Foreclosure Filings were over 3 million in 2008, which was up 81% from 2007 and 225% from 2006″. 

Nevada leads the country with 7% of homes being foreclosed on – that is hard to believe.  In other words, that is a foreclosure on every cul de sac. 

There were over 303,000 that were in some stage of foreclosure during the month of foreclosure, up 17% from the previous month and 41% from December 2007.  This surprised everyone. 

People ask me what the #1 reason is why homes go into foreclosure.  This is obvious – falling home prices.

For example, say a family buys a house for $250,000, they put down 10% so they owe $225,000.  If property values drop 20%, the house is now worth $200,000 and they owe $225,000.  They have to pay a Realtor $14,000 to sell the house, so in essence, they have to bring at least $39,000 to the closing table just to sell their house.  In that case, they usually just let the house go into foreclosure.

As long as home values continue to drop, foreclosures will increase – especially because of the very liberal lending rates that we had in 2004 and 2005 when many people could get into homes for as little as 3% down.

Congress is concerned about this, but I do not think they really understand the problem.  They keep talking about all the people that they want to help keep from going into foreclosure.  What they do not realize is that the best way they can help these people avoid foreclosure is doing all they can to make a stronger market because then home prices will rise and less people will be in foreclosure.