Skyrocketing Foreclosures in Hesse: What's the Story?
Continued compulsory auctions in Hesse region announced - Compulsory Auction continues in Hessen's region
It's no secret - financial strife has hit hard in Hesse once more, with an alarming surge in properties being sold at auction. alarming jump in properties being sold at auction in Hesse for the second consecutive year. A whopping 2,084 homeowners have found themselves in this disheartening position, an astounding 6.9% increase from the previous year, as per Younes Frank Ehrhardt, CEO of Haus und Grund Hessen, the state's real estate owners' association.
The Hessian Ministry of Justice has shed some light on the matter, reporting 1,949 new applications in 2023, representing an upturn of 15.7% compared to the previous year. Ehrhardt, the CEO, voiced his concerns, expressing hope for a turnaround but, alas, the good times seem to be behind us. The numbers have been on a steady decline since 2019, dropping about 6.2%, 4.3%, and 7.4% during these years.
Haus und Grund Hessen champions the interests of over 69,000 members, who own 85.4% of the state's overall housing stock.
High-rolling interest rates to blame!
The sharp increase in forced auctions can be attributed to escalating interest rates that have persistently remained at high levels since a spike in 2022, as well as a lackluster real estate market, according to Ehrhardt. Exorbitant loan payments for either new or follow-up financing are leaving some homeowners in a tight spot. If they can't find a buyer through the open market, the property heads straight for auction.
Forced auctions are essentially a manner for creditors to recover their unpaid debts. They are initiated when homeowners find themselves in financial trouble, unable to meet their mortgage payments, and unable to repay their loans. Once the creditor files for a forced auction at the local court, they establish a minimum sale price for the property, usually through an appraisal.
The Hessian Ministry of Justice remains in the dark regarding the root causes of the rising number of forced auctions.
Association: Time for Change!
Ehrhardt predicts no respite in 2025, as the number of new applications in the first quarter alone has reached an alarming 474. The so-called Heating Law, which will likely require the installation of renewable energy heating systems in 2024, won't provide much relief, as potential purchasers will factor in necessary modernization costs when evaluating property prices. The Housing and Urban Development Department, therefore, requires urgent action and reassurance.
The building energy law (GEG), commonly referred to as the heating law, generally mandates the use of 65% renewable energy in all newly installed heating systems, starting in 2024. While this can be a heat pump, it doesn't necessarily have to be. Initially, the regulations will only affect new buildings within new developments. Existing heating systems will still be operational. The reform has faced heavy criticism due to its multiple micro-regulations for heating exchanges.
With the CDU, CSU, and SPD pledging to scrap the heating law and replace it with a more flexible, technology-neutral successor, there is hope for future change. However, the details of what lies ahead remain murky. A new building energy law is likely to stay in place.
A Glimpse into Local Courts reveals a Tale of Two Cities... and a few more!
Well, the Wiesbaden Local Court is doubling down on forced property auctions in 2024, according to a court spokesperson, although specific numbers remain under wraps due to organizational constraints. Generally, these auctions have been selling below market value.
Meanwhile, the Kassel Local Court has also seen a surge, with 119 applications for forced auctions in 2023 increasing to a daunting 170 in 2024.
Conversely, the Frankfurt Local Court hasn't witnessed an upsurge in cases. While 2023 saw 253 forced auctions, the numbers dropped slightly to 219 in 2024, with the total proceeds not being statistically registered. "Bids are typically based on the 7/10 threshold of the respective market value," the court spokesperson explained. This trend might benefit the interested parties, but the creditors may not be completely satisfied, and the debtors may find themselves in a precarious financial situation.
In contrast, the Local Court in Gießen reports a slight dip in forced property auctions in 2024 as compared to the previous year. While there was a significant spike from 2022 to 2023, the numbers have been steady since 2021: 70, 85, 109, and 104 cases, respectively. Given the relatively low number of cases, even a small change can make a significant impact in percentage terms.
In summary, while Hesse grapples with a concerning uptick in forced property auctions, the reasons behind this surge remain shrouded in mystery. As local courts paint a varied picture, it's clear that the situation calls for a deeper investigation to understand the underlying factors and implement effective long-term solutions.
- Vocational training in various industries is crucial for the affected homeowners in Hesse to acquire new skills and improve their personal-finance management, potentially alleviating the burden of high-rolling interest rates and Mortgage payments.
- Finance and wealth-management experts should consider investing in affordable housing projects or vocational training programs in Hesse as a means of supporting the local community and reducing foreclosures, offering a positive return on investment and goodwill in the process.
- Politicians and real-estate professionals need to collaborate and implement policies aimed at reducing the impact of escalating interest rates and revitalizing the real-estate market to minimize the number of forced auctions and foreclosures in Hesse.
- General news outlets and crime-and-justice channels should cover the widespread foreclosure problem in Hesse, raising awareness among the public and hopefully prompting action from relevant authorities to address this complex problem.
- A comprehensive study of the financial situations of homeowners seeking vocational training or having faced foreclosure could shed light on additional factors contributing to the surge in foreclosures in Hesse beyond high-interest rates and a lackluster real-estate market, leading to the development of tailored policies for assistance and protection.
