Foreclosure activity in several Western markets rose in the second quarter compared to second-quarter 2005 after a dip in the first quarter year-over-year foreclosure activity, according to Foreclosures.com, a foreclosure research company.

California has seen gains in foreclosure activity, and recently hot housing markets in Las Vegas and Phoenix were cooling off rapidly and defaults there were on the rise, too, according to Alexis McGee, Foreclosures.com president.

“Both Las Vegas and Phoenix were impacted by speculators,” she said in a statement, and more than 25 percent of new home sales in both markets were going to out-of-state investors. “The speculators are definitely on the run, and walking away from properties they cannot afford to hold and cannot sell at a profit.”

Foreclosure activity in the Denver metro area was among the highest in the nation.

About 5,300 homes in Colorado have already been lost in foreclosure this year, and more than 11,300 homes were in a pre-foreclosure process as of Aug. 11, McGee reported.

“A more severe situation, however, is in California,” she stated. “A primary reason is the overwhelming use of so-called creative mortgage products people were sold in order to buy ever more expensive homes.” An estimated $1 trillion of these unconventional mortgages were expected to reset in the next 18 months, “and payment shock to such homeowners would be severe if not financially fatal,” McGee said.

In the Midwest region, about 17,467 homes were in some stage of foreclosure in mid-August, Foreclosures.com also reported.

About one in every 101 households in Indianapolis is in some stage of foreclosure, compared with one in every 198 households in the Chicago metro area.

Texas, which had about 12,377 homes lost in foreclosure through mid-August, led the nation with an estimated 16,965 active foreclosure properties at that time.

In Massachusetts, more than 6,400 homes were in foreclosure in mid-August, and 3,800 had already been auctioned off. McGee stated that rising interest rates and continued job loss in the region were primary factors in the rising foreclosures.

“During the recent run-up in prices over the last few years east coast markets became severely overheated, especially in the Boston metro area,” she stated. “Prices there have declined about 4 percent over the last year, but that simply means things are moving back to normal levels.”

In Florida, rising foreclosure activity may be a sign that property flippers who bought at the peak of the market “were simply walking away from houses they were unable to sell at a profit,” Foreclosures.com reported.

About 8,500 properties in Florida went into foreclosure in June, McGee said, and the use of “creative mortgage products” may have contributed to the rise.

“Now, price appreciation has gone flat and even reversed slightly and this trend is colliding with rising interest rates. People who bought at or near the market peak are being squeezed out of their homes and speculators find themselves trapped by rising costs and negative cash flows,” McGee stated.

In Georgia, about 8,900 properties have already been lost this year through foreclosures.

“We think this is only the beginning of a majorshakeout. There are about $400 billion of these exotic loans out there across the country that will reset to market rates this year and cause severe payment shock to homeowners,” McGee stated.

The company covers about 962 counties across the U.S. with more than 1.3 million listings.

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