The new face of foreclosures
Large urban areas such as Las Vegas and Phoenix still dominate for sheer foreclosure volume, but it's the smaller metro areas across the country that are seeing the most dramatic spikes in activity.
The Kennewick-Richland-Pasco metro area had a 217% increase in foreclosure activity over 2009's first half. // © Kennewick
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 such as Las Vegas, San Bernardino, Calif., and Phoenix each recorded upwards of 50,000 foreclosure filings, filings have eased in those areas since the first half of 2009.
Instead, areas such as McAllen, Texas, 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 with the rest of the country, but they have registered the biggest increases so far this year.
- Number of filings (Jan.-June 2010): 1,551
- Percentage increase over 2009's first half: 230%
Rising unemployment and widespread subprime lending during the housing bubble are the primary factors contributing to foreclosures in this area. Unemployment is higher than the national average, at 12.2% as of June, up from 11.2% in June 2009, according to the Bureau of Labor Statistics.
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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, 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.
- Number of filings (Jan.-June 2010): 206
- Percentage increase over 2009's first half: 217%
Kennewick’s unemployment rate stands at 6.2%, down from 6.7% at this time last year and significantly lower than the national rate. Values for existing single-family homes 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 with 706 in the same period in 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, Bland says. Median sale prices for existing homes dropped from $193,800 in 2007 to $170,100, according to preliminary NAR data for the first quarter.
- Number of filings (Jan.-June 2010): 528
- Percentage increase over 2009's first half: 153%
Rising foreclosures are another aftershock from Hurricane Katrina. The federal aid that was distributed in this region fueled construction of new homes and rebuilding of old ones that coincided with the 2006-07 housing bubble, says Ross DeVol, executive director of economic research at the Milken Institute, an independent think tank. Increased construction led to a speculative fervor that prices would continue to rise, leading consumers to buy properties at unreasonably high levels.
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The median sale price of existing homes dropped from $154,400 in 2007 to $128,800, as of the first quarter of 2010, according to the NAR. With values plummeting, many homeowners were underwater and ended up doing a short sale or walking away from the property, Bland says.
The unemployment rate is 9.2%, up from 8% in June 2009, in part because of the downturn in the tourism industry, including casinos, which are a large employer in Gulfport-Biloxi, DeVol says. This area’s woes may not be over and could actually worsen in the near term after the BP oil spill in the Gulf of Mexico; in addition to keeping tourists away from the region, it could also affect residents employed by the oil industry if they find themselves out of work should the ban on BP drilling continue, Bland says.
- Number of filings (Jan.-June 2010): 12,027
- Percentage increase over 2009's first half: 130%
In 2008, Maryland’s governor signed into law changes that halted the state’s foreclosures. Since that moratorium expired, the number of foreclosures has been rising because of the growing backlog of homes with unpaid mortgages, says Margaret McFarland, director of the Colvin Institute of Real Estate Development at the University of Maryland. Median sale prices for existing homes dropped to $234,900 during the first quarter, from $286,100 in 2007.
Compounding declining home values is the unemployment rate, which stands at 7.9%, up slightly from 7.8% in June 2009. “Baltimore doesn’t have an economy that’s turning around yet,” she says, adding that the city’s larger underlying problem is structural unemployment — jobs that aren’t coming back. This issue predates this last recession, starting two decades ago when the manufacturing and port-related industries started leaving. The major industries now are academic and medical, including Johns Hopkins University and the University of Maryland. Employees at the latter have incurred pay cuts, which McFarland says could affect mortgage payments, as well.
Barnstable Town, Mass.
- Number of filings (Jan.-June 2010): 1,403
- Percentage increase over 2009's first half: 93%
Rising foreclosures in Barnstable, the largest community on Cape Cod, are occurring because many homeowners are underwater and can no longer afford to make payments, says Ross Joly, president and CEO of Coldwell Banker Joly, McAbee & Weinert Realty in Cape Cod. The median sale price of existing homes dropped to $325,600 from $384,700 in 2007.
Subprime mortgages were widespread during the boom here, accounting for about 30% of mortgages in the area, he says. “One of the reasons Barnstable county is up [in foreclosures] is because of financing that took place from mortgage companies on the Cape,” he says, adding that lenders were overfinancing, giving borrowers up to $100,000 more than they needed to buy a home.
Unemployment is up at 8.1%, compared with 7.4% last June, in part because of a decline in construction activity. Tourism-related jobs also have been affected because of fewer vacationers, a trend that’s just starting to turn around this summer.
I am purchased and am living in a manufactured home now for 3 years. I lost my job a year ago and have been living on unemployment (after chapter 7 bankruptcy, tons of medical bills). (I am very conscious of my money, and I have been looking for work for over a year, I have had several little "temporary part time" jobs and steadily searching at least 6 hours a day sending resumes and cover letters, and have had very few interviews). I am not behind on payments, but my unemployment runs out in the middle of August, and I am scared that I will loose my home.
I live in Texas and although I have read the "6 Phases of Foreclosure" does it work the same with mobil homes?
There are so many incorrect statements in this "Six Step to Foreclosure" article. I would not rely on the time frames. I would not rely on the publication rules nor would I try to evict anyone right away after buying the property at foreclosure sale.
You do NOT have immediate possession rights in many states. There are some states that have a very long redemption period where the new owner does not hat the right to market/rent/sell until redemption expires.
You do NOT have ANY redemption period of 90 days to reinstate after NOD. You have the ability to negotiate a reinstatement/short sale/deed in lieu or whatever up to and in some cases, after sale but in now way shape or form do you have a blanket 90 days to "Reinstate" after NOD. That's an immature and dangerous statement the author made.