Boost Your Foreclosures Knowledge
Virtually 60% of foreclosures are clustered in four states, according to the newest report from online website, RealtyTrac. You should not be amazed to discover, The Sates of California, Nevada, Arizona and Florida. Jointly they hold 21% of the nation’s inhabitants however had 55% of the foreclosures. The records are quite remarkable. Here are the numbers of foreclosures in the top 10 states, plus the rate of foreclosures per ten thousand houses:
USA 803,489 63
California 230,915 172
Florida 119,220 137
Arizona 49,119 185
Nevada 41,296 370
Illinois 38,996 74
Michigan 33,184 74
Ohio 31,595 62
Georgia 28,608 72
Texas 25,259 27
Virginia 14,725 45
The numbers in the second column inform us of an interesting story. They show foreclosure rates are what you may anticipate in states with high recessionary unemployment, and they are in line with the national rate (or well below, in the case of Texas. March unemployment was 6.7%, well under the national average of 8.5%). Although the foreclosure rates are much, much higher in the so-called Sand States, the states at the top of the list.
What do these states have in common? foremost, high population development throughout most of this decade, if not in the whole state than in main metropolitan areas., The Inland Empire and the Central Valley in California, the I-4 corridor in Florida, metro Phoenix in Arizona, metro Las Vegas in Nevada. This inspired a demand for housing and fast rising house prices that rose to massive bubble dimensions, and then crashed when the local economy commenced to fade (as gaming receipts did in Las Vegas in 2007, for example). Second, large numbers of Latinos immigrants. Lending institutions had motivations under our laws to lend to minorities, and they had a ready market to offload those mortgages in Fannie Mae and Freddie Mac. Third, local economies that became over dependent on construction and real estate, so that when the bubble burst there was not much to fall back on. I have seen estimates that something like one-quarter of the metro Phoenix economy was in construction and real estate.
All of this tells us that the foreclosure difficulty is more a local one than a national one. It was caused by the peculiarities of local economies and demographies which, combined with the effects of government regulation, had influential effects here but very limited effects elsewhere.
The foreclosure crisis elsewhere is the typical problem you encounter in a recession: when people get laid off, they have a harder time paying off their mortgages. There are policy arguments for some kind of ameliorative laws to staunch the pain.
However in the Sand States the crisis is diverse. Housing prices in Phoenix, for example, roughly doubled between 2004 and 2007 and now are back to 2004 levels. Can we, or should we want to, pump them up to 2007 levels again? The answer to both questions, it seems to me, is no. So we will just have to deal with the problem created by the fact that these mortgages were commingled into mortgage-backed securities with those from other areas which are much less likely to result in foreclosures.
It seems to me it should be possible to put metrics on this, to indicate what percentage of mortgages in any mortgage-backed securities is from the Sand States (or from the relevant zip codes threrein). These are obviously riskier than other mortgages, whatever the economic condition of the state. Not many mortgage holders in Michigan are under water, because the state never had much of a housing bubble and not many homeowners there entered into mortgages in the last couple of years (though some may have refinanced).
In contrast, in the Sand States, lots of people are under water, and they will continue to be under water for some period of time until housing prices reach 2007 levels (which may take a decade or a generation, for all we know). We should be able to put labels on mortgage-backed securities that tell financial people more than they know now. Here’s a link to a proposal to put “more granular data online.” This shouldn’t be outside the realm of possibility—and may help financial institution put intelligent values on securities they’re afraid to price right now.
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Excellent post on “Foreclosures Knowledge”.
Thanks,
Thank you so much, there aren’t enough posts on this… or at least i cant find them. I am turning into such a blog nut, I just cant get enough and this is such an important topic… i’ll be sure to write something about your site