The abandoned home (in the foreground) in Detroit was one of nearly 9,000 properties listed on the county auction block last week. Detroit is one of the cities where, despite a foreclosure rate that's 50 percent higher than the national average, the situation appears to be stabilizing.
(Rebecca Cook/Reuters)Photos (1 of 1)
Foreclosure surprise: 10 fastest-growing problem cities are newcomers
By Laurent Belsie | 10.28.09
Just about everyone has become familiar with America’s foreclosure capitals – metropolitan areas like Las Vegas with the nation’s highest rate of foreclosed properties (1 in 20) or No. 2 Merced, Calif., (1 in 27).
But the problem is expanding to new cities. In fact, as the subprime-mortgage crisis eases for some of the top metro areas, like Merced and No. 3 Cape Coral-Fort Myers, Fla., economic pressures are creating new foreclosure capitals. One of them, Reno-Sparks, Nev., broke into the Top 10 foreclosure metros in the third quarter, according to a RealtyTrac report released Thursday. And others are gaining fast.
“These are places that were on no one’s radar screen a year ago,” says Rick Sharga, senior vice president at RealtyTrac, an online foreclosure marketplace based in Irvine, Calif. Now, stressed by rising unemployment and the resetting of exotic mortgages, their foreclosure numbers are skyrocketing.
Take Reno-Sparks. It saw its total foreclosures jump 80 percent over the past year. Its 2.7 percent foreclosure rate is now the ninth-highest in the nation and thus makes it our No. 1 fast-growing foreclosure capital (click on the chart above for the entire list).
No. 2 Boise City-Nampa, Idaho, saw foreclosures jump even more – 142 percent – and now has a rate that’s 2.5 times the national rate. Rounding out the Top 5 are other surprising cities: Provo-Orem, Utah (No. 3), Jacksonville, Fla. (No. 4), and Prescott, Ariz. (No. 5).
Sometimes, the cause of rising foreclosures is clear. Unemployment clearly played a role for No. 6 Chico, Calif., where unemployment hit 12.2 percent in September, No. 8 Rockford, Ill. (15.2 percent), and No. 9 Lansing-East Lansing, Mich. (11.0 percent).
But it doesn’t explain No. 7 Salt Lake City, with 6.0 percent unemployment, or No. 10 Fort Collins-Loveland, Colo., at 5.6 percent.
Another factor behind the foreclosure rise is that exotic adjustable-rate mortgages, known as Alt-A Option ARMs, are now being reset at higher rates. These loans were rather shaky to begin with. They were made to Alt-A customers (just one step up in credit terms from the subprime group), offering borrowers the option each month of making a full payment, a smaller payment that just covered the interest, or a minimum payment that meant their mortgage balance actually went up!
Now that rates are being reset higher and the recession has made their homes worth less, some homeowners are being squeezed out of their properties.
This kind of rolling foreclosure crisis – easing in some cities, rapidly mushrooming in others – doesn’t bode well for a speedy recovery in the housing market. “We’re really not going to see foreclosure activity get down to anything near normal until 2012,” Mr. Sharga says.
Nevertheless, it may preferable to all these problems hitting at once and triggering, perhaps, another steep drop in home values.
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Living in one of these cities? Want to talk about where the housing market is going? Let us know on Twitter.
Comments
2. Frank Sagevsal | 10.28.09
Essentialy we are at the doorstep of an economic depression. The numbers reveal widespread economic weakness, with unemployment and housing locked in a death spiral, the overall economy will only be dragged further underwater.
Until the government starts engines of commerce which the private sector seems incapable of, such as “alternative” energy, widespread infrastructure repair and replacement, and high speed rail, America will continue to falter and with her the world economies.
Did you notice another bridge failure, this time minor in Oakland,CA, when will we repair and replace these aging bridges? The house is falling down and no one seems to care. Put people to work rebuilding America, and the economy will once again blossom.
OH! You’re my new favorite blogger fyi
3. what is fha loan | 10.28.09
We just have to have the faith. Let’s hope for the best that America can once again rock the world.
4. Foreclosure listings | 10.29.09
There’s a complicated situation for those cities… such a bad issue for the governors to solve
5. schmendric | 10.29.09
Left the mortgqge lending business when it became obvious that
constant pressure from real estate agents to come up with loans exceeding
realistic value was making things dangerous. I was the recipient of nasty
calls that I was too slow in getting their buyers these excessive loans. It was hurry-hurry without letup. Obviously the problam was nation-wide and has
brought us to this present economic hangover. Another aspirin, please.
6. Nora | 10.30.09
I dont agree when you say the things wont go better before 2012, i believe next year the things will be already better.
7. Joe | 11.02.09
Sorry Nora, but things will not get better until at least 2012. This is especially true in the housing market. We have a lot more money tied up in risky mortgage instruments that will cause waves of defaults over the next few years. You should also be aware that the foreclosure rate fails to reflect the large number of properties where people stop paying their mortgage, but the bank doesn’t want to go through the foreclosure process for a series of reasons.
The problem is bad and home values will decline for years to come.
8. Foreclosure Listings | 11.12.09
There are good companies out there actually trying to help people. But unfortunately there are also bad ones that are trying to take advantage of the situations. I purchased 2 foreclosures and have been happy with my purchases.
9. Jay | 11.13.09
The cities in Utah and Colorado might offer a low unemployment rate, but the jobs pay very little due to the overabundance of a highly educated labor pool to chose from. They can simply offer very low wages due to the popularity of their location, which is also why housing cost so much out that way.
After a decade in Colorado Springs, SLC and Denver after finishing college, I was offered double my salary for my position back out east in several states (VA,NC,TX and SC) and decided to move. Miss the mountains, but after seriously living frugal (shared a car for several years) during that time, we miss the mountains, but can now afford to visit whenever we want. Miss the weather though.
I hope things get better out there soon though
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1. Frank Sagevsal | 10.28.09
Essentialy we are at the doorstep of an economic depression. The numbers reveal widespread economic weakness, with unemployment and housing locked in a death spiral, the overall economy will only be dragged further underwater.
Until the government starts engines of commerce which the private sector seems incapable of, such as “alternative” energy, widespread infrastructure repair and replacement, and high speed rail, America will continue to falter and with her the world economies.
Did you notice another bridge failure, this time minor in Oakland,CA, when will we repair and replace these aging bridges? The house is falling down and no one seems to care. Put people to work rebuilding America, and the economy will once again blossom.