Indianapolis cheap homes are expected to jump up this year because of the sharp rise in mortgage defaults in the area, based on records from the Fort Wayne Area Association of Realtors and a research firm.

In January, the home loan delinquency rate in the Indianapolis metro area jumped up to almost 8 percent of all mortgaged homes, the highest rate hit in the area over the past 12 months.

Across Indiana, the mortgage default rate also soared in January, as more people lost their jobs and could not find new jobs quickly. In January, out of the 4,622 foreclosures that were filed, almost 1,600 were lis pendens and 1,762 entered lists of pre foreclosure homes. Despite a slowdown in foreclosure activity on a month-over-month basis, Indiana was still 18th in a ranking of states based on percentage of foreclosures.

A major driver in the rise in residential properties entering foreclosure auctions in Indianapolis is significant job loss in the manufacturing sector. The Indianapolis metro area lost almost 4,200 jobs in January and posted a jobless rate of 9.3 percent, an increase of 0.8 points from December 2009 and up by 1.3 points from January 2009.

As job losses pushed more defaults, the number of Indianapolis cheap homes is expected to increase. In February, over 1,500 homeowners in the Indianapolis metro area were notified they were in default or were already in foreclosure. Nearby Evansville and Fort Wayne also posted increases in foreclosure activity.

Realtors in Indianapolis are hoping that the new efforts of the Obama administration to enhance its foreclosure prevention initiatives and the recently announced principal balance reduction scheme of Bank of America will cut down foreclosure activity in the metro area.

The realtors are concerned that the entry of more low-priced homes into the market will crush whatever recovery Indianapolis has achieved over the past several months. The city of Indianapolis was even cited in several national magazines as among the best cities to purchase a home and among the cities with the best prospects for housing recovery.

Among the banks aggressively working out loan modifications and short sales in Indianapolis and other areas of Indiana are Chase and Fifth Third Bank. The Hope Now program is also being carried out aggressively in Indiana, according to its head Faith Schwartz.

Nevertheless, the increase in number of Indianapolis cheap homes is welcomed by real estate investors and lower-income families who are looking seriously at home ownership for the first time in their lives.

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