The New Face of Foreclosures
Matt’s Take on the New’s
August 31, 2010
The New Face of Foreclosures
AnnaMaria Andriotis brings us an article that highlights the growing problem of foreclosures. While Florida, California, Arizona and Nevada account for 50+ % of the nations foreclosures, the problem is spreading to smaller communities around us.
During the first half of 2010, nearly 75% of all metropolitan areas posted increases in foreclosure filings. An 8.3% increase in foreclosure filings was shown as compared to the same period last year. While nasty mortgages attributed to the first wave, nasty mortgages, unemployment and job cuts continue to bash the markets.
The foreclosure filings , subsequent foreclosures and sales of bank owned properties will continue to depress the market for years to come. If you’re not involved in this market now, you need to be.
New’s Article
The New Face of Foreclosures
REAL ESTATE by AnnaMaria Andriotis (Author Archive)
Move over Las Vegas and Phoenix. The foreclosure crisis is entering a second phase, moving into smaller metropolitan areas.
During the first half of this year, 74% of metropolitan areas posted year-over-year increases in foreclosure activity, according to RealtyTrac. In total, more than 1.6 million properties have foreclosure filings, up 8.3% from the first half of 2009.
Although Sun Belt cities like Las Vegas, San Bernardino, Calif., and Phoenix each recorded foreclosure filings upwards of 50,000, filings have eased in those areas since the first half of 2009.
Instead, areas like McAllen, Tx. and Spokane, Wash. have experienced spikes in foreclosures because of extended high unemployment and pay cuts, says Rick Sharga, senior vice president at RealtyTrac. (He projects that foreclosures will peak next year before they decline.)
In general, these five metropolitan areas experienced a relatively small number of foreclosures compared to the rest of the country, but they have registered the biggest increases so far this year.
McAllen-Edinburg-Mission, Texas
Number of foreclosure filings from January to June: 1,551
Percentage increase over the first half of 2009: 230%
Rising unemployment and widespread subprime lending during the housing bubble are the primary factors contributing to foreclosures in this area. Unemployment is above the national average, at 12.2% as of June, up from 11.2% in June 2009, according to the Bureau of Labor Statistics.
Few industries exist in this area. “A big problem is that they haven’t had a lot of big employers and the manufacturing and construction industries there have been hit,” says Don Baylor, senior policy analyst at the Center for Public Policy Priorities, a nonpartisan, nonprofit think tank in Austin, Texas. Construction jobs have plummeted as permits for new housing units fell to 1,769 year to date, down from 3,397 during the same period in 2007, according to the Census Bureau.
Residents are still grappling with the fallout from widespread subprime lending. In 2006, subprime loans accounted for 26.8% of mortgages in McAllen-Edinburg-Mission, the most popular area for subprime mortgages in the country, according to First American LoanPerformance.
Kennewick-Richland-Pasco, Wash.
Number of filings: 206
Percentage increase: 217%
Kennewick’sunemployment rate stands at 6.2%, down from 6.7% at this time last year and significantly lower than the national rate. Existing single-family home values fell only slightly from a median sale price of $169,200 in 2007 to $167,100 in 2009, according to the National Association of Realtors (NAR).
So, what’s contributing to the rise in foreclosures? “The problem for people who are losing their houses is that their mortgages are haunting them, either because their income has dropped and they can’t handle the mortgage or much more likely the mortgage rate adjusted upward and they can’t afford the mortgage any longer,” says Warren Bland, professor emeritus of economic geography at California State University, Northridge. Builders are reacting to the spike in foreclosures; permits for new housing fell to 508 during the first half of this year compared to 706 from January through June 2006.
Another city in Washington – Spokane – has seen a big increase in foreclosure filings, up 103%, in part because borrowers have been intentionally defaulting on their mortgages once their homes fell underwater, says Bland. Median sales prices for existing homes dropped from $193,800 in 2007 to $170,100, according to preliminary NAR data for the first quarter.
