The final 2007 figures from RealtyTrac.com show that foreclosure actions increased 79 percent when compared with 2006. Roughly 2.2 million households received default notices, auction sale notices and notices of bank repossessions. Not all of these homes were lost -- about 1.3 million were sold at the courthouse steps but the rest are hardly safe: They belong to distressed homeowners, people likely to sell fairly soon if they can whether prices are up, down or sideways.

These forced sales, when they appear in official records, will become part of the "comps" used to value your home if you sell or refinance. And if the comps are down you can guess how the world will price your house.

Look for more of the same in 2008 and perhaps worse. Just in the toxic loan category, the Federal Deposit Insurance Corporation now estimates that "almost 1.3 million hybrid loans are scheduled to undergo their first reset during 2008. An additional 422,000 subprime hybrid loans are scheduled to reset in 2009, which means these problems will not end anytime soon."

What can you do? Don't panic. Once the current inventory of exploding ARMs is refinanced or terminated there will be less downward pressure on home prices. Until then, buy and refinance with fixed-rate loans at today's low rates and pay down consumer debt. Most importantly, ask nearby brokers about sale trends in your community because national numbers may not reflect local real estate patterns

Published: February 6, 2008

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