Reed Saxon/AP/File
In 2007, this Pasadena, Calif., home was advertised for sale at a foreclosure auction. Now, foreclosures are spreading to neighboring states.
US foreclosure crisis spreads to new states
By Laurent Belsie | 07.16.09
America’s foreclosure crisis – which has been concentrated in Arizona, California, Florida, and Nevada – is beginning to spill over to neighboring states.
As a result, the fallout from the housing bubble looks increasingly likely to spread, pushed by a worsening economy, rising unemployment, and what appears to be a “bubble thy neighbor” effect.
Nationally, foreclosure filings rose 9 percent to reach 1.5 million in the first six months of 2009, according to a report released Thursday by RealtyTrac, an online marketplace for foreclosure properties. That’s the highest total since the Irvine, Calif., firm began reporting the figures in 2005.
The ‘Big Four’ effect
What’s striking, however, is where that growth came from. Last year, all the growth in foreclosures came from the big bubble states: Arizona, California, Florida, and Nevada. The Big Four saw foreclosures rise to nearly 730,000 in the last half of 2008, up 16 percent from the first six months of that year, according to data calculated from RealtyTrac’s report. For the rest of the US, the number of foreclosures actually fell 5 percent to 667,000 during the same period.
Now, foreclosures outside the Big Four are beginning to rise (click on the chart at right). Overall, they climbed 12 percent for the Big Four and 6.5 percent for everybody else. In some states, such as Hawaii (up 53 percent) and Idaho (up 46 percent), they rose faster than any of the Big Four did.
Recession plays a role
The recession can explain some of this shift. Oregon, which saw foreclosures climb 56 percent during the same period, is struggling with the highest unemployment rate of any state except Michigan. South Carolina (foreclosures up 33 percent) has the third-highest state unemployment rate.
But did recession cause Georgia’s 18 percent foreclosure spike? True, the state has never recorded such high unemployment, but the rate is roughly on par with the national average. Perhaps its proximity to bubble state Florida (foreclosures up 7 percent) has something to do with it.
How else does one explain Utah? Its unemployment rate in May was a stunningly low 5.4 percent (4 percentage points below the US average), but its foreclosures were up 37 percent. That’s 10 percentage points higher than the rise in neighboring foreclosure-champ Nevada.
Bubble spillover
“In theory, it makes sense,” said Rick Sharga, senior vice president at RealtyTrac, in a telephone interview. Home-price appreciation in the Big Four bubble states began to push up prices in neighboring states near the borders. “It could be that some of these toxic loans that kind of trickled across the borders are only now coming into default.”
But other factors also come into play, like local and state moratoriums, he said. In some cases, the numbers change because states change the way they collect the data.
One Utah economist attributed his state’s foreclosure rise to a culture where people marry younger, buy homes younger, and have large families, which strains their budgets.
If indeed there is a housing bubble spillover that can affect nearby states, that could explain Washington State – average unemployment but a foreclosure surge much higher than bubble-victim California.
It doesn’t explain Minnesota’s 53 percent jump, even though it is nowhere near a bubble state and has lower-than-average unemployment.
Bright spots
The picture isn’t all bad. Several states are seeing a consistent drop in foreclosures from six-month-ago and year-ago totals, the RealtyTrac data show. These include Connecticut, Indiana, Montana, Nebraska, New Jersey, Ohio, Oklahoma, and Tennessee. In North Carolina, foreclosures are down 26 percent from the same period six months earlier.
These are encouraging signs that, in some places at least, the housing gloom may be lifting a bit.
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Comments
2. TheLionScribe | 07.17.09
Are the same financial institutions still advertising for you to take advantage and cash in on you home-equity to “take that nice vacation that you always dreamed of, or to remodel your kitchen to a modern look?” Never, now, they are saying that you were not too smart and over-borrowed against your capabilities. It is your fault not theirs, they just suggested it; but, it was you who borrowed it. It is your fault. Financial greed assured by government rescuing is still clean and blameless.
3. Marsha | 07.17.09
Perhaps some of the foreclosures in states with low unemployment are on second homes that people can no longer afford.
4. Elliemae | 07.20.09
Utah’s foreclosure rate is easily explained when you consider that the unemployment numbers don’t include private contractors, such as workers in the construction industry. The St. George area was hit hard by the recession, with many homes left half-built and building contractors out of business or nearly so. These workers aren’t included in the numbers of people who are eligible for unemployment. Housing values have crashed accordingly.
5. Rohit Mahajan | 07.20.09
Foreclosure is the outcome of both unemployment as well as of fool debt but actually this may contain many faces that did frauds for their own interest.
Starting from a few areas this storm may cover the whole country or may limited to major part of a country.
For more contents must visit http://www.housingnewslive.com
6. KMSquire | 07.20.09
While percentage increases can give some information, they can also be misleading. If an area had 10 foreclosures one year, and 20 the next, that’s a 100% increase. Another area might have 100 foreclosures one year, and 110 the next, with “only” a 10% increase. Which is worse? What if the first area had 10000 homes, and the second 1000? That “100% increase” doesn’t look so bad anymore.
Some numbers were given at the beginning of the article, but the number of foreclosures for individual states were not given, and nothing was told about the total number of homeowners in each state. This gives an incomplete picture of how good or bad the situation actually is.
7. Penny K | 07.20.09
As a lifelong Oregonian from 1944 to late 2006, I can tell you real estate prices and rents became obscene relative to income in Portland. I’m sorry, that market has a long way to go, and well it should. I was in real estate once, and I knew what I saw was bogus. Oregon, real estate wise is getting just what it deserves. As for unemployment, I feel sorry for people out of work. It’s going to be harder than ever to rake up that rent/mortgage.
Seven roommates anyone? (Four and five had become common).
8. FarmerMatt | 07.23.09
This is sad. People losing their homes. I never did understand why folks have to go in debt for something they couldn’t afford in the first place. Just like credit cards, it was an easy way to get things they wanted.
If people lived within their own means, I suspect their wouldn’t be alot of folks putting on airs. We were taught to never buy anything on credit and we have stuck to that. Is it so hard to be satisfied with the little things in life? Everybody chasing the dollar, chasing the new cars and everything else. We say no thank you and its a fine day for fishing.
9. nvassarx | 07.23.09
Well, we have been Reading for a while now that from 2009 until 2011 A LARGE number of SubPrime home loans will be Resetting to Higher rates. This is the beginning of another WAVE of forclosures. We had 1, 3, and 5 year ARM’s. When your house note goes up 1/3 to 100%, you can do nothing BUT leave.
10. Rick Cain | 07.23.09
Until home prices are allowed to drop to reasonable levels, people won’t be able to afford them. It seems like the government and big business want to keep this inflationary spiral based on deb-funded growth. Its just plain unsustainable and there needs to be massive deflation of our money to compensate. It puts people holding debt in greater crisis but there’s simply no alternative. There has to be some sort of incentive to save, not spend.
11. anonymous | 07.23.09
This past economic cycle shows two key things:
1) The initial mortgage shock most adversely affected major speculation markets (California, Florida, Nevada, Arizona)
2) But the ongoing structural collapse of the general economy (blame it on “asleep at the wheel” Paulson) is affecting the entire market for American assets (real estate in general)
3) So, while the speculation markets might be on their way to a rebound after the initial exaggerated effect of being in the lead of the general financial/economic meltdown, the REST of the country will continue to suffer because the whole nation has been on a track since the start of the decade of Falling Real Wages that has been compounded by Falling Asset Prices. Falling wages, Falling wealth >> Fewer people can afford their loans >> more mortgage defaults in more places than just the speculation markets.
4) We could have handled these crises as we have in the recent past if we did not have the presidential administration we did from 2005-2008… We would have had a greater debt cushion and a more responsive president and treasurer. GWB was on vacation more than 900 days of his presidency. Nearly three of 8 years was spent on vacation.
12. Nailer45 | 07.26.09
Well ARM loans are due to reset in september and you will see the foreclosures skyrocket again.
We are not in a recession but a Depression and the US Government has pumped Trillions into the markets just to keep them afloat. The USA is broke and sinking .
13. Jared | 07.28.09
Prices in Utah have definitely decreased, however we are seeing a spike in buyers due to several available tax credits. I expect to see prices trend back upward in the next few months.
14. Mr. Milburn Drysdale | 10.29.09
I’m a commercial banker and I GUARANTEE you it will get significantly worse for several more years. You haven’t seen anything yet. A financial Armageddon is coming.
Trackbacks/Pingbacks
2. US foreclosure crisis spreads to new states (The Christian Science Monitor) | Michigan Real Estate Investing | 07.16.09
3. Foreclosures & Unemployment: Dance Partners for 2009 « Uvestor.com | Foreclosures | Short Sales | Real Estate Education | 07.17.09
6. The foreclosure crisis in USA is spreading its wings to engulf new states | Foreclosure Crisis | Foreclosure Articles | 07.27.09
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1. schmendric | 07.16.09
It’s good to be upbeat that the economy is recovering, albeit slowly. The problem is that people with hefty bills to pay - mortgage payments, taxes, etc - can’t wait. They’re the ones whose homes are at risk. It isn’t helping that jobs are currently shakey and unemployment numbers scaling upward. There’s still some economic blood to be spilled before it’s all over.