American banks repossessed twice the number of homes in May as they did a year ago as falling house prices trapped borrowers in mortgages they could not afford. A June 13 RealtyTrac Inc. report said lenders took possession of over 73,000 houses during May alone.

The Washington-based Mortgage Bankers Association reports that 2.47 percent of all U.S. homes were in some stage of foreclosure during the first quarter of this year. That percentage rate is 252 percent higher than the 0.98 percent average for the past 30 years. It is estimated that foreclosures may account for nearly a third of national home sales this year.

These figures are causing some to worry that a negative feedback loop will develop in the United States housing market. In such a loop, increasing repossession rates would drive housing prices down. Then declining housing prices would trap consumers in mortgages they cannot afford. Finally, this would serve to increase repossession rates even further and the cycle would continue. The ultimate consequence would be that the housing market would become an increasingly heavy anchor on the economy in general.

The root cause of this escalating problem is consumers purchasing homes that are beyond their means to afford. For more, read “Storm-Proof Your Financial House” by Robert Morley.