What's up? Foreclosures rise in record year

A record year for construction of new homes in Houston was offset by a negative side effect as the number of residential foreclosures increased sharply in 2004.

A total of 19,866 homes were posted for foreclosure in Harris County, a significant jump from the 17,230 posted in 2003, according to the Foreclosure Listing Service.

Amanda LeCureux of the listing service says the number of postings in 2004 was the highest total the company had seen since mid-1989.

While foreclosures were climbing, new single-family home starts reached 42,000, breaking the 40,000 barrier for the first time in city history.

Annual records also were set for both total dollar volume ($12 billion) and number of property transactions (72,000-plus).

Toni Nelson, president of the Houston Association of Realtors, is not surprised to see record sales in conjunction with rising foreclosures.

Houston's comparatively inexpensive housing coupled with interest rates of less than 6 percent energized demand, Nelson explains.

At the same time, this favorable financial climate attracted a greater number of buyers with limited purchasing power.

"I've seen it predominantly as a first-time buyer situation," says Nelson. "There have been so many programs lately that have allowed people to buy homes who really aren't prepared for it."

She says many new owners probably were not aware of added expenses such as rising property taxes and upkeep costs, which could lead to default on mortgage payments.

Sharon Neider, president of Houston-based Neider Mortgage, says the different options devised by lenders and government agencies have made it easier to buy a new home than at any time during the 20 years she's been in the business.