Foreclosures have increased 14% between the second and third quarter of 2011, following five straight quarters where the number of foreclosures has gone down. This increase could dampen the recovery of the American housing market and harm economic recovery for cities where foreclosures rose significantly. Based on data recently released by RealtyTrac, 24/7 Wall St. has identified the 10 metropolitan regions where foreclosures increased by more than 30%.
The housing crisis that began half a decade ago is the cause of most of the foreclosures, even today. The bubble did not burst at the same time across the country. Many of the cities on this list were among the first to be hit. Eight out of the 10 metropolitan areas listed reached a peak median home value in the first quarter of 2006, after which they started declining. Most regions peaked toward the end of 2006, into 2007. This means the regions listed here have been declining longer than the rest of the country.
Read: The Cities Where Foreclosure Rates Are Skyrocketing
Because home values have been dropping in these areas longer than most other markets, they have generally also fallen further. In half of the regions on this list house prices have declined 50% or more since their peak. Home values in the Cape Coral-Fort Myers area, where foreclosures increased over 35%, have dropped by nearly 60% since the beginning of 2006, the seventh-greatest decline among any region in the U.S.
With a few exceptions, most of the cities listed are full of financially distressed and underwater homeowners — those whose homes are worth less than their mortgages. Six of the cities on this list are among the 20 cities with the largest portion of underwater homeowners. In the case of Fairfield-Vallejo, Florida, 53% of homes are in this position.
24/7 Wall St. used a RealtyTrac’s press release on quarterly rates to identify the 10 cities where foreclosures had increased the most between the second and third quarter of 2011. To illustrate other economic factors at play in these regions, we used unemployment rates from the Bureau of Labor Statistics and home price changes and median family incomes from Fiserv. Finally, 24/7 Wall St. also looked data from Corelogic on the cities with the highest percent of homes with underwater mortgages.
Most of these cities have high unemployment rates, low median family income and falling home values. These three forces combined suggest that foreclosures are likely to get even worse in these areas before they get better.
These are the 10 cities where foreclosure rates are skyrocketing.
10. Columbus, Ohio
> Quarterly increase in foreclosures: +32%
> # of Foreclosures Q3 2011: 2,273
> Unemployment: 7.6%
> % home value down from peak: -12.42%
Columbus hit its median home value peak in the first quarter of 2006. Since that time, home values have declined a relatively modest 12.4%, including a 3.4% drop last year. By the second quarter of 2012, Fiserv projects that homes in the area will lose another 2.3% of their value. Median family income in Columbus is above the national average, and unemployment is just 8%, a full percentage point less than the national average. Despite the fact that things don’t look so bad for the Columbus housing market compared to other regions, the city foreclosure rate still increased by 32% last quarter. A total of 2,273 homes were foreclosed upon during that time.
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9. Cape Coral-Fort Myers, Florida
> Quarterly increase in foreclosures: +35%
> # of Foreclosures Q3 2011: 1,743
> Unemployment: 11.2%
> % home value down from peak: -59.3%
There is arguably no single housing market with a worse long-term outlook than southwest Florida, and the Cape Coral-Fort Myers region is the worst of these. Housing prices in the have already dropped 59.3% from their peak, and Fiserv project them to decline another 12.2% by the second quarter of next year. According to Corelogic, 47% of the homes in the Cape Coral-Fort Myers area are worth less than their mortgages because of declining values. Foreclosures have increased 35% in the last quarter, and with no sign of recovery in the immediate future that trend may worsen in the coming months.
8. Vallejo-Fairfield, California
> Quarterly increase in foreclosures: +36%
> # of Foreclosures Q3 2011: 1,348
> Unemployment: 11%
> % home value down from peak: -59.1%
As of last month, Vallejo-Fairfield had the second-highest foreclosure rate in the country, with one out of every 51 homes being foreclosed upon in the third quarter of this year. This was a 36% increase in foreclosures from the second quarter. Home values have dropped 7.5% in the past year and are projected by Fiserv to drop an additional 4.9% by the second quarter of 2012. A remarkable 53% of homes in the region are worth less than their mortgages. This is the seventh highest rate of homes with underwater mortgages in the country.
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7. Fresno, California
> Quarterly increase in foreclosures: +41%
> # of Foreclosures Q3 2011: 2,174
> Unemployment: 14.9%
> % home value down from peak: -54%
Fresno’s economy has continued to suffer since housing prices began to drop in 2006. It currently has an unemployment rate of 14.9%, which is one of the highest in the country. Home prices peaked in the first quarter of 2006 and have been decreasing since. The metropolitan area also has one of the highest underwater mortgage rates in the country, with a negative equity share of nearly 46%. In the last year alone home prices have dropped 11%.
6. Palm Bay-Melbourne-Titusville, Florida
> Quarterly increase in foreclosures: +44%
> # of Foreclosures Q3 2011: 1,039
> Unemployment: 11.6%
> % home value down from peak: -53.4%
More than 1,000 homes were foreclosed upon in the Palm Bay-Melbourne-Titusville region last quarter, a 44% increase from the previous three-month period. Nearly half of the region’s homes are worth less than their mortgages. With Fiserv projecting home values would drop 7.1% by next year and another 4.9% the year after that, things may just get even worse.
5. Jacksonville, Florida
> Quarterly increase in foreclosures: +49%
> # of Foreclosures Q3 2011: 2,559
> Unemployment: 9.5%
> % home value down from peak: -39.3%
Jacksonville has experienced a quarterly increase in foreclosures of nearly 50%. Home prices have dropped 39.1% since their peak in the second quarter of 2006. The metropolitan area’s negative equity share also exceeds 46%, making it among the worst in the country for underwater mortgages. Home prices are expected to decrease another 10.7% by the second quarter of 2012.
4. Cincinnati-Middleton, Ohio-Kentucky-Indiana
> Quarterly increase in foreclosures: +55%
> # of Foreclosures Q3 2011: 1,956
> Unemployment: 8.7%
> % home value down from peak: -15.9%
Nearly 2,000 homes were foreclosed upon during the last quarter, a 55% increase from the previous three months. Unlike many of the regions on this list with accelerating home foreclures, Cincinnati’s local economy is doing fairly well. Home prices are only down 15.9% from their peak in the first quarter of 2006. Unemployment and median family income are both better than average. One possible explanation for this recent increase may be that nearly a third of the total decline in home value since the peak has occurred in the past 12 months.
3. Sarasota-Bradenton-Venice, Florida
> Quarterly increase in foreclosures: +57%
> # of Foreclosures Q3 2011: 1,673
> Unemployment: 11%
> % home value down from peak: -51.4%
The Sarasota-Bradenton-Venice metropolitan area has seen the third largest increase in the country in foreclosures in the third quarter. However, only 1,673 homes out of the 311,475 on the market were foreclosed upon. The housing market has suffered a great deal since housing prices peaked in the first quarter of 2006. Since then, overall home prices have dropped 51.4%.
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2. Boston-Cambridge-Quincy, Massachusetts
> Quarterly increase in foreclosures: +67%
> # of Foreclosures Q3 2011: 2,003
> Unemployment: 6.6%
> % home value down from peak: -15.8%
The Boston metropolitan area is considered to have a particularly resilient housing market. In the most recent quarter, however, foreclosures have increased 67%. Home prices have only dropped 15.8% since they peaked in the third quarter of 2005. The national average is -32.3%. From the second quarter of 2010 to the second quarter of 2011, home prices dropped a mere 1.7%.
1. Albuquerque, New Mexico
> Quarterly increase in foreclosures: +151%
> # of Foreclosures Q3 2011: 1,358
> Unemployment: 6.9%
> % home value down from peak: -14.9%
Albuquerque’s housing market, like Boston’s, is relatively healthy. While home prices decreased 32.3% nationally after their peak, home prices in Albuquerque only decreased 14.9% since they peaked. Regardless, foreclosures have recently skyrocketed. In the third quarter of 2011, the number of foreclosures in Albuquerque increased 151%. According to New Mexico Business Weekly, the lack of job creation in the area has been a major contributor to this problem.
Michael B. Sauter, Charles B. Stockdale
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